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INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES

In the arbitration proceeding between

JGC HOLDINGS CORPORATION
(FORMERLY JGC CORPORATION)
Claimant

and

KINGDOM OF SPAIN
Respondent

ICSID Case No. ARB/15/27

DECISION ON JURISDICTION, LIABILITY, AND CERTAIN ISSUES OF QUANTUM

Members of the Tribunal
Professor Hi-Taek Shin, President
Professor Dr. August Reinisch
Professor Mónica Pinto

Secretary of the Tribunal
Ms. Mercedes Cordido-Freytes de Kurowski

Date of dispatch to the Parties: May 21, 2021

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Representation of the Parties

(*) no longer with the firm

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TABLE OF SELECTED ABBREVIATIONS/DEFINED TERMS

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I. INTRODUCTION AND PARTIES

1. This case concerns a dispute submitted to the International Centre for Settlement of Investment Disputes (“ICSID” or the “Centre”) on the basis of the Energy Charter Treaty which entered into force for Japan on October 21, 2002, and for the Kingdom of Spain on April 16, 1998 (the “ECT” or “Treaty”), and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which entered into force on October 14, 1966 (the “ICSID Convention”), specifically for Japan on September 16, 1967, and for the Kingdom of Spain on September 17, 1994 .

2. The Claimant is JGC Holdings Corporation (formerly JGC Corporation) (“JGC” or the “Claimant”), a corporation incorporated under the laws of Japan.

3. The Respondent is the Kingdom of Spain (“Spain” or the “Respondent”).

4. The Claimant and the Respondent are collectively referred to as the “Parties.” The Parties’ representatives and their addresses are listed above on page (i).

5. This dispute relates to a series of measures implemented by the government of Spain modifying the regulatory and economic regime of renewable energy projects in 2012 through 2014 after the Claimant made an investment in renewable energy projects in Spain in 2010.

II. PROCEDURAL HISTORY

6. On June 8, 2015, ICSID received a request for arbitration, from JGC Corporation against the Kingdom of Spain (the “Request for Arbitration”), together with Exhibits C-01 to C-15.

7. On June 22, 2015, the Secretary-General of ICSID registered the Request in accordance with Article 36 of the ICSID Convention and notified the Parties of the registration. In the Notice of Registration, the Secretary-General invited the Parties to proceed to constitute an arbitral tribunal as soon as possible in accordance with Rule 7(d) of ICSID’s Rules of

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Procedure for the Institution of Conciliation and Arbitration Proceedings (the “Arbitration Rules”) and Articles 37 to 40 of the ICSID Convention.

8. On September 29, 2015, the Claimant informed the Centre that the Parties had reached an agreement on the method for the constitution of the Arbitral Tribunal. In accordance with this agreement, the Tribunal would consist of three arbitrators, one to be appointed by each Party and the third, the presiding arbitrator, to be appointed by agreement of the Parties. If an agreement was not reached, either Party could request the Secretary-General to appoint, under a ballot procedure, the arbitrator(s) not yet appointed, expressly excluding Article 38 of the ICSID Convention. On this same date, the Respondent confirmed this agreement.

9. On October 1, 2015, following appointment by the Claimant, Professor Rudolf Dolzer, a national of Germany, accepted his appointment as arbitrator.

10. On October 23, 2015, the Claimant informed the Secretary-General that the Respondent had not appointed its party-appointed arbitrator by the agreed deadline of October 20, 2015 and requested the Secretary-General to take the necessary steps towards the corresponding appointment to have the Tribunal constituted as soon as possible.

11. On October 26, 2015, the Tribunal acknowledged receipt of the Claimant’s letter of October 23, 2015, noting that in accordance with the Parties’ agreed method for the constitution of the Tribunal, the Centre stood ready to make any missing appointments, upon either party’s request, from November 10, 2015, as agreed upon by the Parties.

12. On November 3, 2015, the Respondent appointed Professor Mónica Pinto, a national of the Argentine Republic, as arbitrator. On November 11, 2015, Prof. Pinto accepted her appointment as arbitrator.

13. On November 26, 2015, the Claimant informed the Centre that the Parties had not reached an agreement on the appointment of the President of the Tribunal and requested the Secretary-General to proceed with this appointment pursuant to the Parties’ agreement of September 29, 2015.

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14. On December 4, 2015, the Centre submitted a ballot of five (5) candidates for the Parties to consider and to complete by December 15, 2015.

15. On December 15, 2015, the Centre informed the Parties that the ballot did not result in the selection of a mutually agreeable candidate, and that in accordance with the Parties’ agreement of September 29, 2015, the Secretary-General would proceed with the appointment of the presiding arbitrator.

16. On December 21, 2015, the Centre informed the Parties the intention of the Secretary-General to appoint Professor Hi-Taek Shin, a national of the Republic of Korea, as the President of the Tribunal, and invited the Parties to submit their observations on this proposal by December 30, 2015.

17. On December 31, 2015, the Secretary-General informed the Parties that since they had not submitted observations, she would proceed with the appointment of Professor Shin as the presiding arbitrator.

18. On January 4, 2016, the Secretary-General, in accordance with Rule 6(1) of the ICSID Arbitration Rules, notified the Parties that all three arbitrators had accepted their appointments and that the Tribunal was therefore deemed to have been constituted on that date. Ms. Mercedes Cordido-F de Kurowski, ICSID Legal Counsel, was designated to serve as Secretary of the Tribunal.

19. The Tribunal, constituted in accordance with Article 37(2)(a) of the ICSID Convention, is composed by Professor Hi-Taek Shin, a national of the Republic of Korea, President, appointed by the Secretary-General; Professor Rudolf Dolzer, a national of Germany, appointed by the Claimant; and Professor Mónica Pinto, a national of the Argentine Republic, appointed by the Respondent.

20. On February 22, 2016, the Tribunal held a First Session with the Parties, by teleconference in accordance with ICSID Arbitration Rule 13(1).

21. On February 25, 2016, the Tribunal issued Procedural Order No. 1 (“PO1”) recording the agreement of the Parties on procedural matters and the decision of the Tribunal on disputed

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issues. PO1 provides, inter alia, that the applicable Arbitration Rules would be those in effect from April 10, 2006, that the procedural languages would be English and Spanish, and that the place of proceeding would be Washington, D.C., United States of America. PO1 also sets out a schedule for the jurisdictional/merits phase of the proceedings (the “Procedural Calendar”).

22. On June 30, 2016, the Claimant filed its Memorial on the Merits (“Claimant’s Memorial”), accompanied by the witness statements of Mr. Eduard Soler Babot (“CWS-ES” or “Soler’s WS”) with supporting documents to CWS-ES 1-86; Dr. Luis Crespo Rodríguez (“CWS-LCR1” or “Crespo’s First WS”) with supporting documents to CWS-LCR1 1-93, Mr. Masayasu Endo (“CWS-ME1” or “Endo’s First WS”) with supporting documents to CWS-ME1 1-48; Mr. Tetsushi Miyamoto (“CWS-TM1” or “Miyamoto’s First WS”) with supporting documents to CWS-TM1 1-23; and Mr. Valerio Fernández-Quero (“CWS-VFQ” or “Fernández-Quero’s WS”); Compass Lexecon’s Expert Report (“CER-CL1” or “Compass Lexecon’s First Report”); Exhibits to Compass Lexecon’s Expert Report CLEX-1 to CLEX-113; Exhibits C-016 to C-562; and Legal Authorities CL-001 to CL-148.

23. On December 2, 2016, the Respondent filed a Counter-Memorial on the Merits and a Memorial on Jurisdiction (“Respondent’s Counter-Memorial”), accompanied by the witness statement of Mr. Carlos Montoya (“RWS-CM” or “Montoya’s First WS”), exhibits to Mr. Montoya’s witness statement W-0005 to W-0444, the expert report of Econ One Research (“RER-EO1” or “Econ One’s First Report”); exhibits to Econ One’s First Report EO-1 to EO-121; Exhibits R-1 to R-246; and Legal Authorities RL-1 to RL-82.

24. On December 23, 2016, the Parties informed the Tribunal of their agreement to amend the procedural calendar, and the Tribunal confirmed the amended procedural calendar, as agreed by the Parties.

25. On May 8, 2017, the Parties informed the Tribunal of their agreement to further amend the procedural calendar to extend the deadline for the Parties to submit the Redfern Schedules supporting their respective requests for Production of Documents. On the same date, the

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Tribunal authorized a further amendment to the procedural schedule, as agreed by the Parties.

26. Accordingly, on May 22, 2017, each Party filed a Request for Production of Documents. Respondent’s Request was accompanied by Exhibit R-247, and Claimant’s Request by Exhibits C-563 and C-564.

27. On June 21, 2017, the Tribunal issued Procedural Order No. 2 (“PO2”) concerning Production of Documents.

28. On July 24, 2017, the Claimant informed the Tribunal that the Parties had agreed to further amend the procedural calendar. The Respondent confirmed the agreement by subsequent communication.

29. On July 26, 2017, the Tribunal approved the amended procedural calendar, as agreed by the Parties.

30. On December 19, 2017, the Claimant filed an Application for a Confidentiality Order (the “Claimant’s Confidentiality Application”). On this same date, at the Respondent’s request, the Tribunal granted the Respondent leave to comment on the Claimant’s Confidentiality Application by December 29, 2017.

31. On December 29, 2017, the Respondent filed its observations on the Claimant’s Confidentiality Application, together with an Index of Factual Exhibits and Exhibits R-247 to R-249.

32. On January 2, 2018, the Tribunal invited the Claimant to submit its comments on the Respondent’s observations of December 29, 2017, by January 5, 2018. On January 3, 2018, the Claimant requested an extension of this deadline until January 10, 2018.

33. On January 3, 2018, the Tribunal invited the Parties to agree on the deadlines for their respective submissions and to inform the Tribunal accordingly. On this same date, the Respondent proposed that each Party have six (6) business days to submit its comments on each other submissions.

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34. On January 8, 2018, the Claimant agreed to the Respondent’s proposal of January 3, 2018. By communication of the same date, the Tribunal authorized the deadline for the Parties’ submission, as agreed by the Parties.

35. On January 10, 2018, the Claimant filed its Reply to the Respondent’s observations of December 29, 2017, on the Claimant’s Confidentiality Application.

36. On January 18, 2018, the Respondent filed its Rebuttal on the Claimant’s Confidentiality Application.

37. On January 31, 2018, the Claimant filed its Reply Memorial on the Merits and Counter-Memorial on Jurisdiction (“Claimant’s Reply”) accompanied by the second witness statement of Dr. Luis Crespo Rodríguez (“CWS-LCR2” or “Crespo’s 2nd WS”) with supporting documents to CWS-LCR2 1-61; Mr. Masayasu Endo (“CWS-ME2” or “Endo’s 2nd WS”) with supporting documents to CWS-ME2 1-15; Mr. Tetsushi Miyamoto (“CWS-TM2” or “Miyamoto’s 2nd WS”) with supporting documents to CWS-TM2 1-12; and the first witness statement of Mr. Armando Zuluaga Zilbermann (“CWS-AZZ” or “Zuluaga’s First WS”) with supporting documents to CWS-AZZ 1-5; Compass Lexecon’s Second Expert Report (“CER-CL2” or “Compass Lexecon’s 2nd Report”); Exhibits to CER-CL2: CLEX-114 to CLEX-294, Fichtner’s Expert Report (“CER-F” or “Fichtner’s Report”); Exhibits to CER-F: FI-1 to FI-28; Exhibits C-565 to C-703; and Legal Authorities CL-149 to CL-172.

38. On February 1, 2018, the Respondent filed a renewed request for Production of Documents dated January 31, 2018 (the “Respondent’s Renewed POD Request”), arguing non-compliance by the Claimant with PO2 on Production of Documents. On that same date, the Tribunal invited comments from the Claimant by February 8, 2018.

39. On February 6, 2018, the Tribunal issued Procedural Order No. 3 concerning Confidentiality of Documents (“PO3”).

40. On February 8, 2018, the Claimant filed observations on the Respondent’s Renewed POD Request. On February 9, 2018, the Tribunal invited the Respondent to comment within three working days, noting that the Claimant would have the opportunity to make

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comments thereon in three working days. On February 13, 2018, the Respondent filed its response on this matter together with Exhibits R-251 and R-252 and an updated list of the Respondent’s factual exhibits. On February 16, 2018, the Claimant filed further observations in rejoinder.

41. On February 28, 2018, the Tribunal provided directions to the Parties on the Respondent’s Renewed POD Request.

42. On March 2, 2018, each Party filed its response to the questions posed by the Tribunal in its letter of February 28, 2018 regarding the Respondent’s Renewed POD Request. On the same date, the Respondent informed the Tribunal of its receipt of certain files from the Claimant regarding Production of Documents.

43. On March 6, 2018, the Claimant filed a request for leave from the Tribunal to file into the record the Final Arbitral Award rendered in the SCC Arbitration (V2015/063) Novenergia II – Energy & Environment (SCA) (Grand Duchy of Luxembourg), SICAR v. The Kingdom of Spain, dated February 15, 2018 (“Novenergía award”). On the same date, the Tribunal invited the Respondent to comment on the Claimant’s request by March 12, 2018.

44. On March 8, 2018, the Respondent filed a request dated March 7, 2018, for the Tribunal to allow the inspection of the Solacor 1 and Solacor 2 CSP Plants by the Respondent’s Expert on Useful Life, Prof. Jorge Servert (the “Respondent’s Site Visit Request”). On the same date, the Tribunal invited the Claimant to comment on the Respondent’s Site Visit Request by March 15, 2018.

45. On March 12, 2018, the Respondent filed its comments on the Claimant’s request of March 6, 2018 regarding the Novenergía award.

46. On March 12, 2018, the Parties informed the Tribunal of their agreement to request the Tribunal to extend until March 14, 2018, the March 12, 2018 deadline to submit, as required by the Tribunal in its directions of February 28, 2018, an updated full report on the compliance with PO2. On the same date, the Tribunal confirmed the extension of the deadline, as agreed by the Parties. Accordingly, on March 14, 2018, each Party filed a communication regarding its compliance with PO2 regarding Production of Documents.

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47. Also, on March 14, 2018, the Claimant filed a letter with a Redfern Schedule regarding the alleged non-compliance by the Respondent with PO2, requesting the Tribunal to draw adverse inferences from the Respondent’s conduct.

48. On March 15, 2018, the Tribunal invited further comments from the Parties on the outstanding issues regarding Production of Documents. The Tribunal also referred to the Claimant’s request of March 6, 2018 regarding the Novenergía award, noting that although it was already in the public domain, the Tribunal allowed the Claimant to introduce the Novenergía award, and the Parties to make consecutive comments as to its relevance by certain deadlines, which were later extended at the Claimant’s request, with the Respondent’s agreement.

49. On March 15, 2018, the Claimant filed its comments on the Respondent’s Site Visit Request. On March 19, 2018, the Tribunal invited the Respondent to comment on this issue, if it so wished, by March 22, 2018.

50. On March 19, 2018, each Party filed further comments on their respective communications of March 14, 2018 regarding Production of Documents. The Respondent attached to its comments RL 0091EN (Decision of the European Commission, rendered on 11 November 2017, regarding the Support for Electricity generation from renewable energy sources, cogeneration and waste (State Aid S.A. 40348 (2015/NN), and an updated list of legal authorities.

51. By letter of March 22, 2018, the Tribunal referred to the Parties’ recent correspondence concerning the alleged non-compliance with the Tribunal’s PO2 regarding production of documents, noting that the Tribunal deemed that it was premature to make any decision on drawing adverse inferences, reserving its decision until later.

52. On March 22, 2018, the Respondent filed comments on the Claimant’s opposition of March 15, 2018 to the Respondent’s Site Visit Request. On March 23, 2018, the Tribunal posed questions to the Respondent on the Inspection of the Solacor 1 and Solacor 2 CSP Plants by the Respondent’s Expert on Useful Life, and invited the Claimant to comment, if it so

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wished, thereafter. The Respondent filed its response to the Tribunal’s question on March 27, 2018.

53. On April 5, 2018, the Claimant introduced the Novenergía award into the record, as authority CL-0173, together with a brief comment on its relevance and importance to the present case, and an updated list of legal authorities.

54. On April 6, 2018, the Tribunal informed the Parties of its decision to not accept the Respondent’s Site Visit Request dated March 7, 2018, noting that the reasons for its decision would follow later.

55. On April 20, 2018, the Respondent filed its Rejoinder on the Merits and Reply on Jurisdiction (“Respondent’s Rejoinder”), accompanied by the second witness statement of Mr. Carlos Montoya (“RWS-CM2” or “Montoya’s 2nd WS”), exhibits to Mr. Montoya’s 2nd WS W-0005 to W-0693, the Legal Report of Prof. Marcos Vaquer Caballería and María José Santos Morón (“Vaquer and Santos Legal Expert Report”), authorities to the Vaquer and Santos Legal Expert Report RD-001 to RD-0079, the Technical Report of Dr. Jorge Servert (“JSR” or “Servert Report”), exhibits to the Servert Report JSR-01 to JSR-20 and JSRC-01 to JSRC-23, the Second Expert Report of Econ One Research (“RER-EO2” or “Econ One’s 2nd Report”); exhibits to Econ One’s First Report EO-122 to EO-195; Exhibits R-0247 to R-0383; and Legal Authorities RL-0092 to RL-0128, an Updated List of Exhibits, and an Updated List of Legal Authorities.

56. On April 23, 2018, the Tribunal issued Procedural Order No. 4 concerning the Respondent’s Site Visit Request (“PO4”).

57. At the Parties’ request, on May 18, 2018, the Tribunal confirmed the revised procedural schedule, as agreed by the Parties.

58. On May 28, 2018, the Claimant filed its Rejoinder on Jurisdiction (“Claimant’s Rejoinder on Jurisdiction” or “Cl. Rej.”), accompanied by Exhibits C-0704 to C-0713, Legal Authorities CL-0174 to CL-0181, and Updated Lists of Exhibits, and Legal Authorities.

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59. On June 1, 2018, each of the Parties filed its respective notification of witnesses and experts called for cross-examination during the Hearing.

60. Also, on June 1, 2018, the Claimant filed a request for the Tribunal to order the testimony of Mr. Santiago Caravantes Moreno (“Caravantes”) at the Hearing. At the Tribunal’s invitation, on June 8, 2018, the Respondent submitted its observations on the Claimant’s request of June 1, 2018.

61. On June 9, 2018, the Tribunal invited the Claimant to comment on paragraph 8 of the Respondent’s observations of June 8, 2018, within three working days, noting that the Respondent would then have the opportunity to comment, if it so wished, also within three working days. The Claimant submitted its comments in reply on June 13, 2018.

62. On June 20, 2018, the Tribunal noting that both Parties agreed, in principle, to Mr. Caravantes’ testimony during the Hearing, invited the Parties to agree on the details of such testimony, and to inform and/or seek directions from the Tribunal. On the same date, the Parties informed the Tribunal of their agreement to deal with the details of the examination of Mr. Caravantes together with those of the rest of the witnesses and experts that would appear during the Hearing. On June 21, 2018, the Tribunal took note of the Parties’ agreement in this regard.

63. On June 25, 2018, the Respondent filed a request for the Tribunal to lift the confidentiality restrictions under PO3 to enable the Respondent to disclose an exhibit from this case in another case. At the invitation of the Tribunal, the Claimant filed its observations on June 29, 2018. Subsequently, on July 6, 2018, the Tribunal denied the Respondent’s request of June 25, 2018 for the reasons indicated therein.

64. Following exchanges between the Tribunal and the Parties, and after giving ample opportunity to both Parties to state their positions, on June 29, 2018, the Tribunal decided on the issue regarding the interpretation services to and from Japanese to be provided for the examination of two of the Claimant’s fact witnesses, Mr. Masayasu Endo and Mr. Tetsushi Miyamoto, during the Hearing.

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65. Following exchanges between the Tribunal and the Parties, on July 13, 2018, the Tribunal held a Pre-Hearing Organizational Meeting with the Parties by telephone conference. Subsequently, and after consulting with the Parties, the Tribunal issued Procedural Order No. 5 dated July 25, 2018 concerning the Organization of the Hearing (“PO5”).

66. On August 7, 2018, the Respondent filed a request for reconsideration of the Tribunal’s PO5 of July 25, 2018. On August 9, 2018, the Claimant filed observations on the Respondent’s request of August 7, 2018. On August 10, 2018, the Respondent filed a response to the Claimant’s observations of August 9, 2018. On August 14, 2018, the Tribunal issued Procedural Order No. 6 concerning the Respondent’s request for reconsideration of August 7, 2018 (“PO6”).

67. Following exchanges between the Tribunal and the Parties, on August 17, 2018, the Parties submitted to the Tribunal an agreed Agenda for the Hearing.

68. Also, on August 17, 2018, each Party filed a request for leave from the Tribunal to introduce new documents to the record for their use during the Hearing pursuant para. 19 of PO5 and para. 16.3 of PO1. At the Tribunal’s invitation, each Party submitted observations on the other Party’s request, and on August 27, 2018, the Tribunal issued Procedural Order No. 7 (“PO7”) with its decision on the Parties’ requests for the submissions of new documents.

69. On August 28, 2018, the Claimant filed Legal Authority CL-182 and Exhibits C-094 (resubmitted), and C-714 to C-725, together with an updated list of exhibits and legal authorities.

70. Following exchanges between the Tribunal and the Parties, on August 30, 2018, the Tribunal provided directions to the Parties for the filing of responsive documents (“Responsive Documents”) to counter those new documents admitted by the Tribunal under PO7.

71. On August 31, 2018, pursuant to the Tribunal’s directions under PO7, the Respondent filed Exhibits R-384 to R-394, Legal Authority RL-129 and an updated list of exhibits and legal authorities.

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72. On September 3, 2018, the Parties submitted their respective lists of Responsive Documents, and on September 4, 2018, each Party commented on the other Party’s list using a “Redfern schedule format”.

73. On September 5, 2018, the Tribunal issued its decision on the Parties’ requests for the submission of Responsive Documents.

74. On September 6, 2018, pursuant to the Tribunal’s decision of September 5, 2018, the Claimant filed an updated list of exhibits and legal authorities and introduced CL-183 into the record.

75. Also pursuant to the Tribunal’s decision of September 5, 2018, on September 7, 2018, the Respondent filed an updated list of exhibits and introduced Exhibits C-395 and C-396 into the record.

76. On September 11, 2018, each Party filed a Skeleton Brief.

77. On September 12, 2018, each Party filed lists of chronological issues and of questions that required the Tribunal’s determination.

78. A hearing on the merits and jurisdiction was held at the World Bank Conference Centre in Paris, France from September 17 to September 22, 2018 (the “Hearing”). The following persons were present at the Hearing:

Tribunal:

ICSID Secretariat:

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For the Claimant:

Counsel:

Parties:

For the Respondent:

Counsel:

Parties:

Court Reporters:

Interpreters:

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79. During the Hearing, the following persons were examined:

On behalf of the Claimant:

Witnesses:

Experts:

On behalf of the Respondent:

Witness:

Experts:

(*) Present at the Hearing but not examined.

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80. Between October 31, 2018 and January 17, 2019, the Parties filed their agreed corrections to the hearing transcripts.

81. On December 21, 2018, the Parties filed simultaneous Post-Hearing Briefs.

82. On December 28, 2018, the Respondent filed a request for exclusion of evidence concerning the Claimant’s Post-Hearing Brief. This was followed by the Claimant’s comments on January 11, 2019.

83. On January 20, 2019, the Tribunal acknowledged receipt of the Respondent’s request of December 28, 2018, and the Claimant’s comments of January 11, 2019, noting that the Tribunal would review this matter and inform them of its decision in due course.

84. On January 31, 2019, the Parties filed simultaneous Submissions on Costs. The Claimant’s Submission was accompanied by an updated list of legal authorities and Legal Authorities CL-183 to CL-200.

85. On February 15, 2019, the Tribunal approved two rounds of simultaneous submissions on each other’s Submissions on Costs, as agreed by the Parties.

86. On February 22, 2019, each Party filed observations on the other Party’s Submission on Costs, and subsequently, on March 1, 2019, each Party filed a brief reply to the other Party’s observations. The Claimant’s reply was submitted together with an updated list of legal authorities and Legal Authorities CL-201 and CL-202.

87. On May 15, 2019, the European Commission filed an Application for Leave to Intervene as Non-Disputing Party pursuant to Rule 37(2) of the ICSID Arbitration Rules (the “EC’s Application”). On the same date, the Parties were invited to submit their comments on the EC’s Application by May 27, 2019.

88. The Claimant filed its observations on the EC’s Application on May 24, 2019, and the Respondent did so on May 27, 2019. The Respondent’s submission was filed together with an updated List of legal authorities and Legal Authority RL-130.

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89. On June 4, 2019, the Tribunal issued its decision not to accede to the EC’s Application, after considering, inter alia, the advance stage reached by the proceedings, and that the Parties had already filed their Post-Hearing Briefs and Submissions on Costs.

90. On September 17, 2019, the Centre informed the Parties that the Tribunal expected to issue its award by March 2020, and that further updates on its status would be provided to the Parties as soon as possible.

91. On October 10, 2019, the Tribunal invited the Parties, if they so wished, to introduce into the record any publicly available award or decision rendered or fallen into the public domain after the Hearing and until the date of that invitation (i.e., October 10, 2019), concerning the renewable energy sector in which Spain acted as a party that was not yet in the record at the time (the “ECT Decisions”). Each Party would also have the opportunity to file brief comments of such decisions.

92. On October 18, 2019, the Claimant informed the Tribunal and the ICSID Secretariat that it had changed its corporate name from “JGC Corporation” to “JGC Holdings Corporation” and requested leave from the Tribunal to submit its updated corporate registration. On October 19, 2019, the Tribunal granted the Claimant’s request and invited the Respondent to submit its comments on this issue, if it so wished.

93. On October 21, 2019, the Claimant submitted its updated corporate registration.

94. Also on October 21, 2019, the Claimant with reference to the Tribunal’s invitation of October 10, 2019, proposed providing one single document (instead of summaries of each award or decision) covering (i) a number of factual and legal issues identified in the awards and decisions that are at stake in this arbitration and (ii) the treatment given to them by the tribunals by comparison with the Parties’ positions in this arbitration. This proposal was admitted by the Tribunal by email of the same date, noting that Respondent could proceed that way too, if it so wished.

95. On October 25, 2019, each Party filed (i) its comments to new awards and decisions rendered or made publicly available in Spanish ECT cases until October 10, 2019; (ii) a list of its new legal authorities as of October 25, 2019; together with (iii) copies of the new

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authorities (Claimant’s Legal Authorities CL-201 to CL-211, and Respondent’s Legal Authorities RL-131 to RL-140).

96. On October 28, 2019, the Claimant replaced its submission of October 25, 2019, including its list of legal authorities, deleting Legal Authority CL-210, which was the award rendered on August 2, 2019, in the case InfraRed Environmental Infrastructure GP Limited and others v. Kingdom of Spain, ICSID Case No. ARB/14/12 (“InfraRed award”). On this same date, the Tribunal invited the Respondent to confirm whether it agreed with this action.

97. On October 30, 2019, the Respondent informed the Tribunal that it did not oppose the replacement of the previous submission as long as no reference was made in the record to it, given that the Claimant made comments on a precedent that Spain did not have the opportunity to comment upon. The Respondent also reiterated its request of December 28, 2018, concerning Claimant’s Post-Hearing Brief, and requested the Tribunal to extend its Decision to references made in the Claimant’s comments to new awards and decisions in Spanish ECT cases, which should be stricken out of the record.

98. Following an invitation from the Tribunal, on November 6, 2019, the Claimant agreed with the Respondent’s approach that “no reference” should be made to the InfraRed award, and requested the Tribunal to uphold its replaced submission of October 28, 2019.

99. On November 8, 2019, the Respondent informed the Tribunal that in light of the reasoning of the Court of Justice of the European Union in its Opinion 1/2017¹, the Respondent thereby withdrew its objection to jurisdiction based on EU law, i.e., the Achmea objection. Following the Tribunal’s invitation, on November 15, 2019, the Claimant submitted its comments on the Respondent’s withdrawal of the Achmea objection.

¹ Opinion 1/17 of the Plenary Session of the Court of Justice CJEU, CETA, April 30, 2019, publicly available at: http://curia.europa.eu/juris/document/document.jsf?text=&docid=213502&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=9435105

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100. On December 4, 2019, the Tribunal issued Procedural Order No. 8 on Respondent’s Withdrawal of the Objection to the Jurisdiction of the Tribunal Based on the Reasoning in Achmea (“PO8”).

101. Also, on December 4, 2019, the Respondent requested leave from the Tribunal to introduce additional documents into the record. On December 9, 2019, the Claimant submitted its comments on this request, noting that the Claimant did not oppose the introduction of the new documents requested by Spain if the Tribunal allowed the Claimant to re-introduce the InfraRed award, as well as its comments thereon, into the record.

102. On December 11, 2019, the Tribunal issued Procedural Order No. 9 (“PO9”), denying, for the reasons indicated therein, Respondent’s request of December 28, 2018 for the exclusion of evidence from the record concerning the Claimant’s Post-Hearing Brief.

103. On December 23, 2019, the Tribunal granted the Parties’ requests of December 4 and December 9, 2019, to introduce additional documents into the record (the Stadtwerke award, the BayWa decision, and the InfraRed award) provided that they were not subject to any confidentiality obligation.

104. On December 26, 2019, each Party submitted into the record the additional awards/decision approved by the Tribunal on December 23, 2019. The Claimant’s submission was accompanied by an updated List of legal authorities and Legal Authority CL-210², and the Respondent’s submission was filed together with an updated List of legal authorities and Legal Authorities RL-141³, RL-142⁴, RL-143⁵ and RL-144⁶.

² InfraRed Environmental Infrastructure GP Limited and others v. Kingdom of Spain, ICSID Case No. ARB/14/12, Award, August 2, 2019 (“InfraRed Award”) (CL-210).
³ BayWa r.e. renewable energy GmbH and BayWa r.e. Asset Holding Gmbh v. Kingdom of Spain, ICSID Case No. ARB/15/16, Decision on Jurisdiction, Liability and Directions on Quantum, December 2, 2019 (“BayWa Decision”) (RL-141).
⁴ Dissenting Opinion of Mr. Horacio Grigera Naón attached to the BayWa decision (RL-142).
⁵ Stadtwerke München GMBH, RWE Innogy GmbH, and others v Kingdom of Spain, ICSID Case No. ARB/15/1, Award, December 2, 2019 (“Stadtwerke Award”) (RL-143).
⁶ Dissenting Opinion of Mr Kaj Hobér attached to the Stadtwerke award (RL-144).

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105. On March 10, 2020, the Respondent requested leave from the Tribunal for (i) the Respondent to submit three new legal authorities (PV Investors⁷, Hydro Energy⁸ and RWE⁹), and (ii) the Parties to provide simultaneous written commentaries, if the Tribunal so wished.

106. On March 13, 2020, the Claimant objected to the Respondent’s request of March 10, 2020, and requested the Tribunal an update on the status of its Award in the present case.

107. On March 21, 2020, given the advanced status of the proceedings and of the Tribunal’s work, the Tribunal denied the Respondent’s request of March 10, 2020 for leave to introduce three new legal authorities into the record, and informed the Parties on the status of the Tribunal’s work in the present case.

108. On April 8, 2020, the Parties were notified that Prof. Rudolf Dolzer had passed away, and that in accordance with ICSID Arbitration Rule 10(2), the proceeding was suspended until the vacancy resulting from Prof. Dolzer’s passing had been filled. In accordance with ICSID Arbitration Rule 11(1), the Claimant was to appoint a new arbitrator following the same method by which Prof. Dolzer had been appointed.

109. By letter of April 22, 2020, the Claimant informed the Secretariat of the appointment of Prof. Dr. August Reinisch, a national of Austria, as arbitrator pursuant to ICSID Arbitration Rule 11(1). Prof. Dr. Reinisch subsequently accepted his appointment.

110. On April 23, 2020, the Centre informed the Parties that the Tribunal was reconstituted and that in accordance with ICSID Arbitration Rule 12, the proceeding was resumed on that day.

111. On May 11, 2020, the Respondent proposed the disqualification of Prof. Dr. August Reinisch pursuant to Article 57 of the ICSID Convention and Rule 9 of the ICSID

⁷ PV Investors v. the Kingdom of Spain, PCA Case No. 2012-14, Award, February 28, 2020 (“PV Investors award”), including the Concurring and Dissenting Opinion of Charles N. Brower issued in that case.
⁸ Hydro Energy 1 S.à r.l. and Hydroxana Sweden AB v. Kingdom of Spain, ICSID Case No. ARB/15/42, Decision on Jurisdiction, Liability and Directions on Quantum, March 9, 2020 (“Hydro Energy Decision”).
⁹ RWE Innogy GmbH and RWE Innogy Aersa S.A.U. v. Kingdom of Spain, ICSID Case No. ARB/14/34, Decision on Jurisdiction, Liability and Certain Issues of Quantum, December 30, 2019 (“RWE Decision”).

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Arbitration Rules. In accordance with ICSID Arbitration Rule 9(6), the proceeding was suspended on that same date until a decision was taken by the two unchallenged Members of the Tribunal, Prof. Hi-Taek Shin and Prof. Mónica Pinto (the “Unchallenged Arbitrators”), as provided for in Article 58 of the ICSID Convention and ICSID Arbitration Rule 9(4).

112. On the same date, May 11, 2020, the two Unchallenged Arbitrators set a timetable for the Parties’ submissions and Prof. Dr. Reinisch’s explanations.

113. As scheduled, the Claimant filed comments on the Disqualification Proposal on May 19, 2020, and Prof. Dr. Reinisch furnished explanations on May 23, 2020. On May 30, 2020, the Respondent submitted additional observations on the Proposal. No further observations were received from the Claimant.

114. On July 14, 2020, the proposal for disqualification of arbitrator August Reinisch was declined by the Unchallenged Arbitrators, and the proceeding was resumed pursuant to ICSID Arbitration Rule 9(6).

115. On October 10, 2020, the Respondent requested leave from the Tribunal to submit into the record the Decision on Jurisdiction, Liability and Directions on Quantum issued on August 31, 2020 in Cavalum SGPS, S.A. v. the Kingdom of Spain (ICSID Case No. ARB/15/34) (the “Cavalum decision”), together with the Dissenting Opinion of Mr. David R. Haigh Q.C.. The Respondent also noted, that unless the Tribunal preferred otherwise, given the advanced stage of the proceeding, it was not necessary for the Parties to make written observations on this new legal authority.

116. On October 14, 2020, following an invitation of the Tribunal, the Claimant opposed to the Respondent’s request of October 10, 2020 for the reasons indicated therein, and requested the Tribunal to inform the Parties on “the stage of the deliberations of the case and the potential date of issuance of the Award”.

117. On October 20, 2020, the Tribunal informed the Parties that (i) given the advanced status of the proceedings and the Tribunal’s work, the Tribunal denied the Respondent’s request of October 10, 2020; and (ii) as for the status of the Tribunal’s work, there had been some

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obstacles for the fluency of the Tribunal Members’ work. There were health concerns, followed by the current pandemic worldwide situation, the unfortunate passing of Professor Dolzer, the reconstitution of the Tribunal and the disqualification proposal. The Tribunal also noted that since then its Members had exchanged draft sections and thorough notes expressing their particular views on several issues. As a result, the Tribunal anticipated that it should have its work ready by mid-February 2021, thanking the Parties for their understanding.

III. FACTUAL BACKGROUND

118. The Tribunal provides below a summary of the factual background to the dispute. It is not meant to be exhaustive, and the Tribunal might address additional facts in the Tribunal’s analysis, to the extent that they are relevant and useful. The Tribunal has nonetheless considered all the evidence produced in this case. The Tribunal will follow a chronological order, whenever it is possible, and will describe the Parties’ positions regarding the underlying facts that are disputed by the Parties.

A. OVERVIEW

119. In order to promote the use of power generation from renewable energies, including concentrated solar thermal power (“CSP”), during the 1990s the Respondent decided to put in place a specific regulatory framework, that is described below, which provided certain incentives to attract investors to engage in energy projects in Spain.

120. The Claimant invested in two 50-MW CSP plants, Solacor 1 and Solacor 2, located in El Carpio, near Córdoba, in Andalusia (Southern Spain) (Solacor 1 and Solacor 2 plants are collectively referred to as the “Solacor Plants”).

B. THE ENERGY CHARTER TREATY

121. As indicated before, this case concerns a dispute submitted to ICSID on the basis of the ECT and the ICSID Convention. The Claimant argues that the Respondent has breached its obligations under the ECT and international law.

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122. The ECT is a multilateral treaty. It provides a multilateral framework for energy cooperation that is unique under international law. The ECT was adopted in 1994, and entered into force for Japan on October 21, 2002, and for the Kingdom of Spain on April 16, 1998.

C. THE SPANISH REGULATORY FRAMEWORK

123. In this section, the Tribunal will review the Spanish regulatory framework governing the production of electricity utilizing CSP technology and the remuneration regime therefor in reliance on which the Claimant made an investment in the Solacor Plants in 2010 and the subsequent changes made thereto in 2012 through 2014 which have impacted the Claimant’s investment. While this section is based upon the Parties’ respective chronology and the evidence on the record of the proceedings, it does not purport to be exhaustive of all aspects of the regulatory framework during the covered period nor to include only legislation applicable to the Claimant’s investment in the Solacor Plants. Rather it focuses on the salient aspects of the Spanish regulatory framework upon which the Parties have placed reliance in advancing their respective positions in the course of these proceedings and which the Tribunal finds useful in analysing the merits of the Claimant’s claim.

Law 54/1997 (EPA 1997)

124. The backbone of the Spanish regulatory framework applicable to renewable energy production, in particular CSP plants in which the Claimant invested in 2010, was the Electric Power Act 1997, enacted on November 27, 1997 (“Law 54/1997” or “EPA 1997”),¹⁰ and successive royal decrees promulgated thereunder.

125. Law 54/1997 organized power production activities in two separate regimes: Ordinary Regime (“Ordinary Regime”) and Special Regime (“Special Regime”). The Ordinary Regime was applicable to conventional production facilities using non-renewable energy sources, while the Special Regime was applicable to qualifying electricity producers using

¹⁰ Electric Power Act, Act 54/1997, of November 27, on the Electric Power Sector (Published in the Official State Journal, BOE, on November 28, 1997) (C-0036) (R-0003). (C-0036tt) and (R-0003EN) refer to “Spanish Electric Power Act (Unofficial English Translation)”, 4th Edition, 2008, National Energy Regulatory Commission (Spain) ; (C-0036t) is a partial English translation of EPA 1997. In this Decision, the Tribunal, in principle, relies on (C-0036tt) (R-0003EN) when the Parties’ respective translation differs.

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non-consumable renewable source of energies, such as CSP, and with an installed capacity not exceeding 50 MW. This dual system was established due to the need to promote production through renewable energy sources, since the price that could be obtained in the competitive market by renewable energy producers was insufficient to cover construction and operation costs with reasonable return on investment and to achieve this, subsidies were necessary to be profitable.¹¹

126. Law 54/1997 set forth Spain’s policy objective to have the contribution of renewable sources of energy reach 12% of the Spanish gross energy consumption by the year 2010 (“12% Objective”) and mandated the Government to draw a plan to “promote renewable energies and whose objectives shall be taken into account in the setting of premiums”.¹² The mandate of Law 54/1997 has been implemented by successive Renewable Energy Plans.¹³ Law 54/1997 also laid down a legal framework governing the rights and obligations of electricity generators under the Special Regime.

127. Under Law 54/1997, remuneration of electricity producers under the Special Regime is composed of two components: the market price for the sale of electricity and a premium that complements the market prices to guarantee the economic viability of that activity. Specifically, Article 30(4) of Law 54/1997 provides that:

“The remuneration arrangements for electric power generation installations operating under the special regime shall be supplemented by the payment of a premium under statutory terms set out in regulations and in the following cases”¹⁴

128. The same article mandates the Government to consider the following in setting the premium:

“To work out the premiums, the voltage level on delivery of the power to the network, the effective contribution to environmental improvement, to primary energy saving and energy efficiency, the generation of economically justifiable useful heat and the investment costs incurred shall all be taken into account so as

¹¹ Resp. C-Mem., para. 266.
¹² Sixteenth Transitory Provision of Law 54/1997 amended this provision and moved it to Twenty-fifth Additional Provision, which reads that: “The Government shall modify the Plan for the Promotion of Renewable Energies in order to adapt it to the objectives established by the European Union of 20% by 2020 and shall maintain the Plan's commitment to 12% by 2010. These objectives shall be taken into consideration when setting the premiums for these type of installations”. (C-0036tt) (R-0003EN).
¹³ Resp. C-Mem., para. 274.
¹⁴ (C-0036tt)(R-0003EN)

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to achieve reasonable profitability rates with reference to the cost of money on capital markets.”¹⁵

129. Thus, the Spanish Government was authorized to set the premiums to promote renewable energies taking into consideration the objective set by the EPA at 12% by 2010 and 20% by 2020.

130. EPA 1997 established a system of registration for the facilities under the Special Regime to benefit from the rights thereunder in the Register of Production Installations under the Special Regime (“RAIPRE”)¹⁶, managed by the Ministry of Energy (and coordinated with the regional registers managed by each Autonomous Community in Spain).¹⁷ Article 31 of EPA 1997 requires that in each case, “the entry shall specify the remunerative arrangements that apply.”¹⁸

131. The Spanish Government has carried out its mandate given by the EPA 1997 through successive royal decrees such as RD 2828/1998, RD 841/2001, RD 436/2004, RD 661/2007 and RD 1614/2010 based upon principles set forth therein.

Royal Decree 2818/1998

132. On December 23, 1998, Royal Decree 2818/1998, on the production of electric energy by facilities supplied through sources or resources of renewable energy, waste or cogeneration (“RD 2818/1998”) was approved.¹⁹ It was the first regulatory development implementing Law 54/1997.²⁰ RD 2818/1998, in its preamble, provided that it aimed to promote Special Regime installations, with incentives with “no time limit”.²¹

133. RD 2828/1998 adopted a remuneration framework which was composed of the market price and premium as an additional payment to encourage the development of Special

¹⁵ Id.
¹⁶ In Spanish, Registro administrativo de instalaciones de producción en régimen especial.
¹⁷ Cl. Mem., 137.
¹⁸ (C-0036tt)(R-0003EN)
¹⁹ Royal Decree 2818/1998 of December 23, 1998 on the production of electrical energy by facilities using resources or sources of renewable, waste-based, or cogeneration energies. (C-0050t) (R-0080EN)
²⁰ Resp. C-Mem., para 336.
²¹ (C-0050t)

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Regime facilities.²² Solar and solar thermal, wind and hydraulic technology producers under Special Regime could choose to receive one total price of a certain number of pesetas per Kwh instead of the market price plus premium option.²³

134. Article 32 of RD 2818/1998 prescribed reviews of the premiums every four years, according to the following criteria: (i) the evolution of the price of electrical energy on the market, (ii) the participation of said facilities in meeting the demand, and (iii) its impact on the technical management of the system.²⁴

Plan to Encourage Renewable Energies 2000-2010

135. In accordance with the mandate of Law 54/1997, in 1999 the Council of Ministers approved the 2000-2010 Plan de Fomento de las Energías Renovables en España (Plan to Encourage Renewable Energies 2000-2010, “2000-2010 Energy Plan”), prepared by the Institute for Diversification and Saving of Energy (“IDAE”).²⁵ The 2000-2010 Energy Plan assessed the situation of the renewable sector in Spain and defined specific objectives (per technology) to be achieved by 2010. This Plan stated that considering the high level of solar radiation existing in Spain, the country might become a pioneer in the commercial development of CSP technologies and set an objective of 200 MW of CSP installed capacity by 2010.²⁶ This plan also recognized that stability was needed in development and subsidy programs to avoid market uncertainties over a lack of clarity on investment conditions.²⁷

136. The Respondent explains that the true purpose of this Plan was simply to assess the costs the Spanish electricity system assumed for the launch of renewable energies according to the reasonable profitability expected to be given to producers of renewable energy²⁸ and the method used in this plan, in defining, within the scope of each technology and according to the state of the art at the time, consisted (and has always consisted) of different “typical

²² (C-0050t) Article 26 (Price for delivered electric power).
²³ Resp. C-Mem., paras. 337 and 338 citing Articles 26 and 28 of RD 2818/1998.
²⁴ Ibid., para. 345.
²⁵ Plan to Encourage Renewable Energies in Spain 2000-2010. (R-0100) (C-0046/C-0046t resubmitted)
²⁶ (C-0046t), pp.74-75.
²⁷ Ibid., pp.96-97; Cl. Mem., para 180.
²⁸ Resp. C-Mem., para. 365.

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facilities.”²⁹ According to the Respondent, once said typical facilities had been determined, different standards should be established for each one (investment costs, operating costs, useful life of the plant, primed production hours, market price) which would allow said plant to reach, within a certain amount of time (useful life) a reasonable profitability according to the cost of money in the capital market.

EU Directive 2001/77/EC

137. On September 27, 2001, Directive 2001/77/EC of the European Parliament and of the Council on the promotion of electricity produced from renewable energy sources in the internal electricity market (“2001 EU Renewable Directive”) was approved.³⁰ It recognized the need for public support in favour of renewable energy sources, taking into account the need to internalise external costs of electricity generation. It stated that “Member States operate different mechanisms of support for renewable energy sources at the national level”, and that “[o]ne important means to achieve the aim of this Directive is to guarantee the proper functioning of these mechanisms, until a Community framework is put into operation, in order to maintain investor confidence.”³¹ Under this Directive, Spain’s indicative target was to draw 29.4% of its electricity from renewable sources by 2010.³²

Royal Decree 841/2002

138. On August 2, 2002, Royal Decree 841/2002 (“RD 841/2002”) was enacted, which amended RD 2818/1998. RD 841/2002 categorized CSP installations as Sub-group b.1.2. within the Special Regime, separate from other solar technologies like PV.³³ The Sub-group b.1.2 facilities might use fuel to maintain the temperature of their heat accumulator during periods when their electrical generation was interrupted.

²⁹ Ibid., para. 362.
³⁰ Directive 2001/77/EC of the European Parliament and of the Council of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market, published in the Official Journal of the European Union, October 27, 2001. (In English) (RL-0015)
³¹ Ibid., p. I.283/34.
³² Ibid. Annex, p.I.283/39.
³³ Partial translation into English of RD 841/2002, August 2, 2002 (C-0054t), Article 2(1).

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Royal Decree 436/2004

139. On March 12, 2004, Royal Decree 436/2004, establishing the methodology for updating and systematising the legal and economic framework for electricity generation under the Special Regime (“RD 436/2004”)³⁴ was enacted. RD 436/2004 replaced RD 2818/1998. The Respondent explains that the purpose of RD 436/2004 was to achieve the objectives of the 2000-2010 Energy Plan and eliminate the volatility of the previous system for calculating the remuneration for renewable energies.³⁵

140. Article 22 (Remuneration mechanisms for the electric power produced in the special regime) of RD 436/2004 granted two remuneration options to the operators of the facilities under the Special Regime as follows³⁶:

“a) Assignment of the electricity over to the electricity distributor. In this case, the electricity sale price shall be expressed as a regulated tariff which shall be a single, flat rate for all scheduling periods and expressed in euro cents per kilowatt hour.³⁷

b) Sale of the electricity freely on the market, through the system of offers and bids managed by the market operator, through the bilateral trading, forward trading system or through a combination of all of them. In this case, the sale price of the electricity shall be the price resulting in the organized market or the price freely traded by the plant operator or the representative, supplemented by an incentive and, as the case may be, by a premium, both expressed in euro cents per kilowatt hour.”³⁸

141. Article 22(3) of RD 436/2004 provides that “operators of installations falling within the scope of this Royal Decree may choose, for periods of no less than one year, the energy sale option most suitable for them and they shall communicate this information to the distribution company and to the Directorate General of Energy Policy and Mines giving at least one month’s advance notice in respect of the date of the option change”.³⁹

142. The preamble of RD 436/2004 states that “[w]hichever remuneration mechanism is chosen, the Royal Decree guarantees operators of special regime installations fair remuneration for

³⁴ (R-0082SP)(R-0082EN)
³⁵ Resp. C-Mem., para. 370.
³⁶ (R-0082EN), Article 22(1).
³⁷ The Tribunal will refer this remuneration option as FiT option or regulated tariff option.
³⁸ The Tribunal will refer this remuneration option as FiP option or pool price plus premium option.
³⁹ RD 436/2004 (R-0082EN)

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their investments and an equally fair allocation to electricity consumers of the costs that can be attributed to the electricity system...”⁴⁰

143. According to the Respondent, the market price plus premium option does not only have the purpose of giving plants reasonable profitability, “it was established in order to encourage the participation of renewable energies in the market. With this purpose, if the facilities chose the market option, they were given an incentive to cover the additional costs involved in participating in the market."⁴¹

144. RD 436/2004 included provisions detailing the mechanism for determining the regulated tariff, premium and incentives for those under the Special Regime. ⁴² Utilizing the average or reference electricity tariff set by the regulator, Article 33(3) of RD 436/2004 stipulated the remuneration of CSP installations in Subgroup b.1.2 (to which the Solacor Plants belong) to be: “(i) Tariff: 300% during the first 25 years from their commissioning and 240%⁴³ from then onwards (ii) Premium: 250% during the first 25 years from their commissioning and 200% from then onwards; and (iii) Incentive: 10%".

145. For CSP installations under Sub-group b.1.2, RD436/2004 allowed the use of back-up fuel to maintain the temperature of the hot transmission fluid to compensate the lack of solar irradiation, and provided that electricity production from the back-up fuel, annually, must be less than 12% of total electricity production if the facility sold its energy at the regulated tariff (“FiT”). The percentage might reach 15% if the facility sold its energy under the market price plus premium (“FiP”) option.⁴⁴

⁴⁰ (R-0082EN). In its Counter Memorial, the Respondent quotes this language in a slight different English translation as follows: “Whichever remuneration mechanism is chosen, the Royal Decree guarantees to owners of special regime facilities, a reasonable return for their investments; and to electricity consumers, a reasonable allocation of the costs attributable to the electrical system (...)”. Where the Respondent uses in its submission an English translation different from its own English translation submitted as exhibits, the Tribunal will rely on the English translation of the Respondent's exhibits on the record. ↩
⁴¹ Resp. C-Mem., para. 381. ↩
⁴² (R-0082EN), Article 23 (Regulated Tariff), Article 24 (Premium) and Article 25 (Incentive for market participation). ↩
⁴³ Spanish version (R-0082SP) shows 240%, while English translation (R-0082EN) shows 200%. Resp. C-Mem. states that it is 240%. Resp. C-Mem., para. 377. ↩
⁴⁴ (R-0082EN) (C-0051t), Article 2 (Scope of application). ↩

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146. The average or reference electricity tariff was set by the regulator in accordance with Royal Decree 1432/2002 (“RD 1432/2002"). ⁴⁵ Sixth additional provision of RD 436/2004 (Average or reference tariff in 2004) stated that the average or reference tariff for the year 2004 had a value of 7.2072 cE/kWh.

147. A notable provision in RD 436/2004 was paragraph 3 of Article 40 (Revision of tariffs, premiums, incentives and supplements for new plants) which provided for a possibility of a revision of tariffs and premiums in 2006, and every four years thereafter. It also included an express provision grandfathering existing plants in operation at the time of such revision. The text reads as follows⁴⁶:

“3. The tariffs, premiums, incentives and supplements resulting from any of the revisions provided for in this section shall apply solely to the plants that commence operating subsequent to the date of the entry into force referred to in the paragraph above and shall not have a backdated effect on any previous tariffs and premiums."

148. Article 33(4) provides for an earlier revision in case the installed capacity of CSP installations reaches 200 MW as follows: ⁴⁷

“4. Notwithstanding the provisions of article 40, whenever ... subgroup b.1.2 reaches 200 MW of installed capacity, the figures for the tariffs, incentives and premiums stated in this article shall undergo revision.”

2005-2010 Plan for Renewable Energies

149. In August 2005, the Spanish Government approved the plan for renewable energies in Spain 2005-2010 (the “2005-2010 Energy Plan") prepared by IDAE. ⁴⁸ This plan revised the previous 2000-2010 Energy Plan. The 2005-2010 Energy Plan had a dual objective: to maintain the commitment to meet at least 12% of the total energy consumption in 2010 with renewable sources, as part of the policies to encourage renewable energy in the EU, and to incorporate, among others, a new goal of achieving 29.4% of electricity generation from renewables set for Spain in the EU Directive.⁴⁹ According to this plan, in regard to

⁴⁵ Royal Decree 1432/2002, December 27, 2002. (R-0081EN) ↩
⁴⁶ (R-0082EN), Article 40(3). ↩
⁴⁷ (R-0082EN) ↩
⁴⁸ Partial translation into English of the 2005-2010 Renewable Energies Plan, August 26, 2005. (C-0055t) ↩
⁴⁹ Resp. C-Mem., para. 397. ↩

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electricity production, generation with renewables reaches 30.3% of the gross electricity consumption in 2010, thus fulfilling the 29.4% target. ⁵⁰

150. The 2005-2010 Energy Plan sets the implementation objectives for all renewable technologies to be aspired for 2010. Recognizing that “at the end of 2004 the percentage contribution of renewable energy to the primary energy consumption had only increased a few tenths with respect to 1998”⁵¹, the 2005-2010 Energy Plan found it necessary to revise the previous plan and prepare a new one with the design of new scenarios and the establishment of objectives.

151. This plan stated that while wind, biofuels and biogas had evolved in a satisfactory manner, areas such as solar energy were “developing notably below the rhythm necessary to achieve the final objective” ⁵². The 2005-2010 Energy Plan noted that while not a single solar thermal energy project had been commissioned in Spain as of the end of the year 2004,⁵³ three projects were then in execution, for a total power capacity of 110 MW⁵⁴.

152. With respect to the regulatory aspects, the 2005-2010 Energy Plan stated that RD 436/2004 established an economic framework that was sufficiently favourable for the development of solar thermal energy, but it limited the remuneration conditions by setting a maximum of 200 MW. It also noted that allowing the solar thermal operators to use gas to maintain the temperature and offset the lack of solar radiation up to 12% if sold at a fixed price, and 15% if sold on the market, reinforced the operation and viability of the projects.⁵⁵

153. Noting the absence of a certain degree of commercial development in the solar thermal area, this plan identified three economic barriers in the use of solar resources: (i) need for subsidies to promote investment in initial projects; (ii) low degree of precision in the valuation of the initial projects, which led to an increase in their costs; and (iii) uncertainty regarding the institutions that could be sources of financing. ⁵⁶ It also identified as one of

⁵⁰ (C-0055t), p. 9. ↩
⁵¹ Id. ↩
⁵² Ibid., Section 2.2., pp. 19 and 20. ↩
⁵³ Ibid., Section 3.4.2.1., p. 133. ↩
⁵⁴ Ibid., Section 3.4.1., p. 132. ↩
⁵⁵ Ibid., Section 3.4.2.4, p.138. ↩
⁵⁶ Ibid., Section 3.4.2.7, pp. 142-143. ↩

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the regulatory barriers the limitation of existing premiums and tariffs up to a limit of 200MW set by RD 436/2004. It stated that this limitation represented a limitation of the development of the sector because there were projects in execution of the total 110 MW and in the permit-processing phase of 325 MW.⁵⁷ This Plan proposed the maintenance of the conditions in RD 436/2004 with the increase of the limit of the legal framework to 500 MW installed capacity and 1,298 GW/h production in 2010, and 2,882 GWh during the period 2005-2010.⁵⁸

Royal Decree-Law 7/2006

154. On June 23, 2006, Royal Decree-Law 7/2006, (“RD-L 7/2006"), adopting urgent measures in the energy sector, was approved. ⁵⁹

155. The Respondent explains the background of introducing RD-Law 7/2006 and RD 661/2007 as follows: There had been an extraordinary increase in the market price of energy due to the increase in the price of oil and the inclusion of greenhouse gas emission rights in the price of energy. Thus, the price of energy reached 50-60 euros/MW. Then, the situation changed from all facilities having the option to a regulated tariff to a situation where most of the facilities opted for the remuneration according to the market price plus premium, obtaining a level of remuneration that was much higher than what the Respondent's regulator foresaw. To address this issue, the Respondent approved, with extraordinary urgency, RD-L 7/2006, which froze the subsidies to those under the Special Regime until a new remuneration regime would be developed based on the amendment that RD-L 7/2006 introduced to Law 54/1997. The new remuneration framework announced by RD-Law 7/2006 was implemented by RD 661/2007.⁶⁰

⁵⁷ Ibid., Section 3.4.4.1, p.148 ↩
⁵⁸ Id. ↩
⁵⁹ RD-L 7/2006, June 23, 2006. (C-0056) (R-0071) ↩
⁶⁰ Resp. C-Mem., paras. 420 through 422. ↩

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Report 3/2007 of the National Energy Commission

156. On February 14, 2007, the National Energy Commission (“CNE” or “NEC”)⁶¹ issued its Report 3/2007 concerning a proposal for a Royal Decree that regulated electric power production under the Special Regime and that of certain similar technological installations under the Ordinary Regime (“CNE Report 2007").⁶²

157. The CNE Report 2007 recognized that under EU Directive 2001/77/EC Member States were left free to establish the economic support systems for the development of such energy, as well as the technical and administrative rules for approval of the installations. ⁶³

158. Recognizing that “economic incentives in a liberalized framework such as that of electricity production, represent a significant tool of energy and environmental policy”⁶⁴, this Report highlighted the importance of minimizing regulatory uncertainty in the following words:

“The NEC understands that transparency and predictability in the future of economic incentives reduces regulatory uncertainty, incentivising investments in new capacity and minimizing the cost of financing projects, thus reducing the final cost to the consumer. The regulation must offer sufficient guarantees to ensure that economic incentives are stable and predictable throughout the service life of the facility. In each case, regulation must provide both transparent annual adjustment mechanisms, associated to robust trend indexes (such as the average or reference tariff, the CPI, ten-year bonds, etc.) and regular reviews that only affect new facilities (e.g., every four years) with regard to investment costs, which could also affect the reduction of operating costs at existing installation. ” ⁶⁵ [Emphasis added]

⁶¹ In Spanish, Comisión Nacional de Energía. ↩
⁶² CNE Report 3/2007, February 14, 2007. (C-0044) (R-0110) ↩
⁶³ (C-0044t) (R-0110EN), Section 5.1, p.10. ↩
⁶⁴ (R-0110EN) Section 5.3, p. 15. ↩
⁶⁵ Ibid., Section 5.3 b), p. 16. ↩

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Royal Decree 661/2007

159. On May 25, 2007, the Respondent enacted Royal Decree 661/2007 (“RD 661/2007") regulating the activity of electricity production under the special regime. ⁶⁶ RD 661/2007, which replaced its predecessor RD 436/2004, entered into force on June 1, 2007.

160. The preamble of RD 661/2007 stated that the economic framework established in RD 661/2007 developed the principles provided in EPA 1997, which guaranteed the owners of facilities under the Special Regime a reasonable return on their investments, and the consumers of electricity an assignment of the costs attributable to the electricity system which was also reasonable.⁶⁷ It further stated that in certain technologies the targets in respect of the promotion of renewable energy covered in the 2005-2010 Energy Plan were still far from being reached, and the modification of the existing economic and legal framework regulating the Special Regime had become necessary. The economic circumstance made it necessary to de-link the remuneration system from the average electricity tariff, or reference tariff formula established by RD 436/2004.

161. The official press release issued by the Spanish Government on May 25, 2007 was titled as “The Government assigns priority to profitability and stability in the new Royal Decree on renewable energy and cogeneration”. ⁶⁸ It stated that:

“The purpose of this Royal Decree is to improve the remuneration of those less mature technologies, such as biomass and thermosolar, so as to be able to meet the objectives of the 2005-2010 Renewable Energies Plan (Plan de Energías Renovables 2005-2010), as well as the commitments entered into by Spain at the European level. Through the development of these technologies, 12% of Spain's energy consumption in 2010 will be met from renewable sources. "⁶⁹ [Emphasis added]

162. Considering the importance of RD 661/2007 acknowledged by both Parties, key features of RD 661/2007 are described in detail in the following paragraphs.

⁶⁶ RD 661/2007, May 25, 2007. (C-0037t) (R-0084EN) ↩
⁶⁷ (R-0084EN), BOE May 26, 2006, no. 126, ↩
⁶⁸ Ministry of Industry, Tourism and Commerce, “The Government assigns priority to profitability and stability in the new Royal Decree on renewable energy and cogeneration”, May 25, 2007. (C-0075t) ↩
⁶⁹ Id. ↩

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163. Article 2 (Scope of Application) of RD 661/2007 classified CSP plants as Subgroup b.1.2 as was the case in RD 436/2004.⁷⁰ The same article retained the feature in the RD 436/2004 allowing CSP installations to use fuel for the maintenance of the temperature in order to compensate for a lack of solar irradiation up to 12% of the total production of electricity if the facility chose the regulated tariff (FiT) option, and 15% if the FiP option was chosen.

164. RD 661/2007 offered operators of CSP plants under the Special Regime two options to remunerate production of electricity: (i) the regulated tariff (or feed-in tariff) option expressed in Euro cents per kWh (“Regulated Tariff” or “FiT”) and (ii) the market price plus premium expressed in Euro cents per kWh (“FiP”).⁷¹

165. While both RD 436/2004 and RD 661/2007 offered both FiT and FiP options to CSP plants under the Special Regime, the difference between the two is that under RD 661/2007, the regulated tariff should be expressed in fixed figures expressed in Euro cents per kWh and the premium under the FiP option should also be set in Euro cents per kWh rather than leaving the determination to the regulator (see paras. 144 and 146 supra). Thus, the uncertainty arising from linking the remuneration to the concept of average electricity tariff or reference tariff formula determined by the regulator under RD 436/2004 was eliminated in RD 661/2007. RD 667/2007 also introduced the concept of "cap" and "floor” for the FiP option.

166. Specifically, Table 3 of Article 36 of RD 661/2007 (Tariffs and premiums for facilities in Category b)) set forth the rates and premiums for facilities classified as category b. in concrete numbers. According to this Table, for the category b.1.2) to which CSP plants belonged, for the first 25 years, the regulated tariff (cE/kWh) was set at 26.9375 for the first 25 years, and 21.5498 thereafter, the reference premium (cE/kWh) is 25.4000 for the first 25 years, and 20.3200 thereafter, with the upper limit of 34.3976 and lower limit 25.4038 applicable both to the first 25 years and thereafter.⁷² There was no limit on the period of time except that after the first 25 years, the reduced rate applied..

⁷⁰ (R-0084EN) (C-0037t), RD 661/2007, Article 2(1). ↩
⁷¹ Ibid., Article 24(1). ↩
⁷² Ibid., Article 36, Table 3. ↩

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167. Article 37 provided that the target reference installed power for CSP installations (Sub- group b.1.2) was set at 500 MW.

168. Under RD 661/2007, the rights of the producers under the Special Regime included the right to enjoy priority in access and connection to the electricity grid. ⁷³

169. Article 9 of RD 661/2007 provided that to ensure proper monitoring of the Special Regime and in particular in order to ensure the management and control of the receipt of the regulated tariffs, the premiums and supplements, facilities under the Special Regime should be subject to compulsory registration in the Public Authority Register of power production facilities under the Special Regime in two steps: an initial registration and a final registration. ⁷⁴ Article 11 of RD 661/2007 set forth details of the initial registration, and Article 12 set forth details of the final registration.

170. With respect to the effect of the final registration, Article 14(1) of RD 661/2007 provided, in pertinent part, that:

“the final registration of the facility in the Public Authority Register of production facilities under the special regime shall be a necessary requirement for the application of the economic regime regulated under this Royal Decree to such

⁷³ Ibid., Article 17. ↩
⁷⁴ Ibid., Article 9. ↩

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facility, with effect from the first day of the month following the date of the final deed of entry into service of the facility. "⁷⁵ [Emphasis added]

171. In its official press release issued on May 25, 2007, the Ministry of Industry, Tourism and Commerce explained the remuneration for the CSP sector under RD 661/2007 as follows:

“For other technologies which require a boost due to their limited development, as with... thermoelectric solar power, the profitability increases to 8% with the transfer of production to distributors and between 7% to 11% if they participate in the market."

“Thus, increases in the regulated tariff compared with that envisaged in Royal Decree 436/2004 are ... 17% for thermosolar installations....

When installations opt to participate in the production market, the premium obtained shall be variable according to the hourly market price. To this end, lower and upper limits are established for each of the technologies, known as cap and floor limits. Under this system, the premium will be adjusted in such a manner that the total remuneration obtained by an installation shall remain within such limits in each hourly period.

The tariffs, premiums and upper and lower limits, as well as other supplements, shall be updated on the basis of the CPI, less 0.25 until 2012 or less 0.50 from then onwards. "⁷⁶

172. Article 44(1) of RD 661/2007 addressed the update and revision of tariffs, premiums and supplements for various groups in detail. The provision relevant to CSP sector (Sub-group b.1.2) reads as follows:

“The values of the tariffs, premiums, supplements, and lower and upper limits to the hourly price of the market as defined in this Royal Decree, for category b) [...], shall be updated on an annual basis using as a reference the increase in the RPI less the value set out in the Additional Provision One of the present Royal Decree. "⁷⁷

173. The Additional Provision One of RD 661/2007 referred to in the above provision stated that:

“The reference value set out for the subtraction of the RPI indicated in the present Royal Decree for updating certain established values shall be twenty-five basis points up to 31 December 2012, and fifty basis points thereafter. "⁷⁸

⁷⁵ Ibid., Article 14. ↩
⁷⁶ Official Press Release of the Ministry of Industry, Tourism and Commerce, May 25, 2007. (C-0075t) ↩
⁷⁷ (R-0084EN) Article 44(1) of RD 661/2007. ↩
⁷⁸ Ibid., Additional Provision One of RD 661/2007. ↩

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174. Article 44(3) addressed the potential revision of the tariffs, premiums, supplements and lower and upper limits, and the effect of such future revisions on existing facilities. The Parties disagree on the interpretation and the legal effect of this provision. The text reads as follows:

“During the year 2010, on sight of the results of the monitoring reports on the degree of fulfilment of the Renewable Energies Plan (PER) 2005-2010, and of the Energy Efficiency and Savings Strategy in Spain (E4), together with such new targets as may be included in the subsequent Renewable Energies Plan 2011-2020, there shall be a review of the tariffs, premiums, supplements and lower and upper limits defined in this Royal Decree with regard to the costs associated with each of these technologies, the degree of participation of the special regime in covering the demand and its impact upon the technical and economic management of the system, and a reasonable rate of profitability shall always be guaranteed with reference to the cost of money in the capital markets. Subsequently a further review shall be performed every four years, maintaining the same criteria as previously.

The revisions to the regulated tariff and the upper and lower limits indicated in this paragraph shall not affect facilities for which the deed of commissioning shall have been granted prior to 1 January of the second year following the year in which the revision shall have been performed. ”⁷⁹ [Emphasis added]

175. The above-mentioned official press release of the Ministry of Industry, Tourism and Commerce of Spain issued on May 25, 2007 explained Article 44(3) of RD 661/2007 in the following words:

“In 2010 the tariffs and premiums established in the proposal will be reviewed in the light of the aims established in the 2005-2010 Renewable Energies Plan and the Energy Saving and Efficiency Strategy (Estrategia de Ahorro y Eficiencia Energética), and in accordance with the new targets to be included in the next Renewable Energies Plan for the 2011-2020 period.

Any revisions of tariffs to be carried out in the future shall not affect the facilities already in operation. This guarantee provides legal certainty for the producer, providing stability for the sector and promoting its development. " ⁸⁰ [Emphasis added]

176. The same official press release stressed the importance of the stability and the sufficient and reasonable return to make the investment and engagement in the new technology activity attractive by stating that:

⁷⁹ (R-0084EN) ↩
⁸⁰ (C-0075t) ↩

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“The government's commitment to this energy technologies has been the reason why in the new regulation stability in time is sought allowing business owners to plan in the medium and long term, as well as a sufficient and reasonable return which, like the stability, makes the investment and engagement in this activity attractive. " ⁸¹ [Emphasis added]

Directive 2009/28/EC

177. On April 23, 2009, the Directive 2009/28/EC of the European Parliament and of the Council of April 23, 2009 on the promotion of the use of energy from renewable sources was approved. ⁸² It repealed earlier Directives 2001/77/EC and 2003/30/EC. ⁸³ This Directive reaffirmed the EU's commitment to the promotion of renewable energies and established the objective that by 2020 the EU would seek to obtain 20% of its total energy consumption requirements from renewable energy sources. The Directive stated that “it is appropriate to establish mandatory national targets consistent with a 20% share of energy from renewable sources...by 2020." ⁸⁴ It further states that "[t]he main purpose of mandatory national targets is to provide certainty for investors and to encourage continuous development of technologies which generate energy from all types of renewable sources.”⁸⁵ The Directive set the national target for Spain for the share of energy from renewable sources in gross final consumption of energy in 2020 at 20%. ⁸⁶

Royal Decree-Law 6/2009

178. On April 30, 2009, in the aftermath of international financial crisis, the Respondent enacted Royal Decree-Law 6/2009 (“RD-L 6/2009”) of April 30, 2009, adopting certain measures in the power sector and approving reduced rates. ⁸⁷ It went into effect on May 7, 2009. The preamble of RD-L 6/2009 states that the growing tariff deficit is “producing serious problems, which, in the current context of international financial crisis is profoundly affecting the system. ” It further states that “[t]his maladjustment is unsustainable and has

⁸¹ Id. ↩
⁸² Directive 2009/28/EC of the Parliament and of the Council, April 23, 2009, on the promotion of the use of energy from renewable sources and the amendment and repeal of Directives 2001/77/EC and 2003/30/EC, published in the Official Journal of the European Union on June 5, 2009. (In English) (RL-0017) ↩
⁸³ Ibid., Article 26 (Amendments and repeal) ↩
⁸⁴ Ibid., Preamble 13. ↩
⁸⁵ Ibid., Preamble 14. ↩
⁸⁶ Ibid., Annex I. ↩
⁸⁷ RD-L 6/2009, April 30, 2009. (C-0038) (R-0072) ↩

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serious consequences, by deteriorating the security and capacity of the financing of investments needed for the supply of electricity at the levels of quality and security that the Spanish society demands.”⁸⁸

179. In order to address the identified problems, RD-L 6/2009 adopted certain urgent measures to protect consumers and ensure the economic sustainability of the electricity system as well as the regulatory measures aimed at reactivating and re-launching investment in the power sector. RD-L 6/2009 stipulated that the income deficit of the settlement of the regulated activities of the electricity sector for years 2009, 2010, 2011 and 2012 should be no greater than EUR 3,500 million, EUR 2,000 million, EUR 2,000 million and EUR 1,000 million respectively, and as of January 1, 2013, the access fees should be sufficient to satisfy all the costs of the regulated activities without appearing as ex ante deficit. ⁸⁹ Moreover, in order to regulate the financing of the deficit and the legal regime governing the tariff deficit, RD-L 6/2009 introduced provisions regarding the securitization of collection rights by creating the Securitization Fund for the Deficit of the Electricity System. ⁹⁰

180. Another important feature of RD-L 6/2009 was the creation of a new sub-section in RAIPRE for the registration of pre-approved projects, called “Remuneration Pre- Assignment Register”. This Register was created to allow the government to carry out the appropriate planning for those under the Special Regime as well as to guarantee the necessary legal security for those who have made investments. On this point, the preamble of RD-L 6/2009 stated that

“This [the measure provided for in the Royal Decree-Law, by setting up the pre- assignment of payment register] will enable information to be available within the time periods provided for in the Royal Decree-Law, not only for the currently planned installations, but also that these comply with the conditions for implementation and access to the electricity system with all the legal and regulatory requirements, the volume of power associated with the same, and the impact on the electricity tariff costs and their schedule. In any case, the rights and expectations of the owners of the installations are respected, setting the precise

⁸⁸ (R-0072EN) Preamble of RD-L 6/2009. ↩
⁸⁹ (R-0072EN) (C-0038t), Article 1. ↩
⁹⁰ Id. ↩

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precautions and providing a transitional scheme need for the adaptation. ”⁹¹ (the Respondent's English translation)

“It will make it possible to know, within the periods established under the Royal Decree-Law, what facilities are currently planned but also that they meet the requirements for executing and accessing the electrical system with all the legal and regulatory provisions, the power capacity they will have, and their impact on the cost of the electric tariff and its calendar. In any case it respects the rights and expectations of the power plant owners, establishes the precautionary measures that are necessary and the transitory regime need for adaptation.” ⁹² (the Claimant's English translation)

181. Registration in such Pre-Assignment Register was necessary to obtain the right to the economic scheme established in RD 661/2007.⁹³ This allowed project developers to begin construction of plants with the benefit of knowing beforehand that their facilities would qualify under the Special Regime, subject to compliance with specific deadlines and conditions. ⁹⁴ This new registry required renewable project developers to provide extensive information, as well as proof of initial permits and supply contracts. ⁹⁵ Facilities not registered within a period of 30 calendar days, starting from May 7, 2009 could not apply for the right to the RD 661/2007 economic regime.⁹⁶

182. Facilities registered on the Remuneration Pre-Assignment Register had a maximum period of thirty-six months from the date of notification, to be finally registered on the RAIPRE and to start the sale of energy. Otherwise, their economic right associated with inclusion in the Pre-Assignment Register should be revoked.⁹⁷

183. The fifth transitional disposition of RD-L 6/2009 stated that when the capacity associated with the pre-registered projects were higher than the stipulated target of capacity, the economic regime established under RD 661/2007 should apply and it should be used up with the pre-registered facilities. In such case, by means of resolution of the Council of Ministers, at the proposal of the Ministry of Industry, Tourism and Commerce, annual

⁹¹ (R-0072EN) ↩
⁹² (C-0038t) ↩
⁹³ (C-0038t) (R-0072EN), Articles 4(1) and 4(2). ↩
⁹⁴ (CWS-ES), Mr. Eduard Soler Babot's witness statement, para. 28; email from Mr. Eduard Soler Babot to Mr. Yusuke Yamazaki of May 13, 2009. (C-0129/C-0129t). ↩
⁹⁵ Cl. Mem., para. 319. ↩
⁹⁶ RD-L 6/2009, Fourth Transitional Provision ↩
⁹⁷ (C-0038t) (R-0072EN), Article 4(8). ↩

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restrictions might be established with regard to the execution and entry into operation of the pre-registered facilities and they might be granted priority in order to avoid compromising the technical and economic sustainability of the system.

Council of Ministers' Resolution of November 13, 2009

184. On November 13, 2009, the Spanish Council of Ministers issued a Resolution which established that the pre-registered installations utilising CSP technology would enter into operation in four successive phases (“Resolution of the Council of Ministers of November 13, 2009”). ⁹⁸

185. The background of the resolution was explained in its preamble as follows: The capacity associated with the CSP facilities definitely registered in the RAIPRE before May 7, 2009 was of 81 MW while RD 661/2007 set the capacity targets for CSP technology at 500 MW. However, pursuant to the provisions of RD-Law 6/2009, the applicants utilizing CSP technology submitted 104 applications with a total capacity of 4,499 MW, well in excess of the 500 MW limit. The wind technology sector faced similar over-capacity issue. As the capacity applied for the CSP technology together with the capacity already installed exceeded the 500 MW target set by RD 661/2007, an analysis was performed on both the technical and economic impact entailed by the entry into operation of a much higher capacity than the target. According to the analysis on the economic impact of the entry into operation of renewable energy production facilities for the 2014 horizon prepared by the Secretary of State for Energy, (i) the extra cost to the system derived from the fulfilment of the objectives of the 2005-2010 Energy Plan would amount to around EUR 3.66 billion in 2010, valued at the current market prices; and (ii) this situation would worsen if all the facilities registered in the Pre-Assignment Register entered into operation in 2010, which would push the extra cost of the Special Regime to EUR 7.254 billion. The analysis concluded that the gradual entry into operation of CSP facilities (as well as wind technology facilities) registered in the Pre-Assignment Register, during the period 2010- 2013, would permit a much more moderate absorption of the costs associated with these

⁹⁸ Resolution of the Council of Ministers of November 13, 2009. This Resolution was published on the BOE on November 24, 2009. (C-0134) (R-0098) ↩

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technologies. The proposed start-up scenario involved an additional cost of the Special Regime of EUR 5.959 billion in 2010.⁹⁹

186. Based upon the economic analysis referred to above, the Council of Ministers determined that:

“for thermoelectric and wind power technologies, where the capacity applied for significantly exceeds the pace of implementation provided for so far, it is necessary to schedule its entry into operation so as not to compromise the technical and economic security of the Electrical System, taking into consideration the planned pace of implementation of the remaining technologies, and the aforementioned technical and economic restrictions. ”¹⁰⁰

187. On this rationale, this Resolution established annual restrictions on the implementation and commissioning of the registered facilities and their prioritization. This Resolution ordered that the commissioning of the facilities using CSP technology in four phases with the cumulative implementation rate as follows: (i) Phase 1: 850 MW; (ii) Phase 2: 1,350 MW; (iii) Phase 3, 1,850 MW; and (iv) Phase 4, remaining registered capacity. ¹⁰¹ The Resolution set forth the timetable for each phase, and stipulated that the facilities registered in the Remuneration Pre-Assignment Register associated with each of the phases may not start feeding power to the network of the distribution or transmission operator before the date designated for each phase: (i) Phase 2: January 1, 2011; (ii) Phase 3: January 1, 2012 and (iii) Phase 4: January 1, 2013. ¹⁰² It further provided that such facilities must be definitively registered in the RAIPRE and must start selling power before the designated date for each Phase: for Phases 2 and 3 by January 1, 2013 and for Phase 4 by January 1, 2014.

188. The Resolution made it explicit that these restrictions did not involve the alteration of the economic rights recognized by RD-L 6/2009.¹⁰³ This confirmed that the feed-in regime would remain applicable to pre-registered installations.¹⁰⁴

⁹⁹ Ibid., III of the Preamble. ↩
¹⁰⁰ (C-0134t), p.3. ↩
¹⁰¹ (C-0134) (R-0098), para. 2. ↩
¹⁰² Ibid., para. 4. ↩
¹⁰³ Ibid., Section IV. ↩
¹⁰⁴ (CWS-ES), Mr. Eduard Soler Babot's witness statement, paras. 41-42; emails between Mr. Yusuke Yamazaki and Mr. Eduard Soler Babot of November 12, 2009. (C-0135/C-0135t). ↩

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189. The concurrent Council of Ministers Reference issued by the Secretary of State for Communication of Spain on November 13, 2009 included statements under the caption of “Approval of Schedule for new wind and thermosolar facilities for the next three years” as follows:

“Today's resolution means that developers can now see the landscape for the next three years, thus allowing them to plan their business well in advance. Further it brings in the necessary certainty for promoters and for the industry associated with these important sectors of renewable energies, as well as rationalizing the annual increase in the cost of power that for consumers has meant the rolling of these facilities. "¹⁰⁵ [Emphasis added]

190. On December 15, 2009, the Ministry of Industry, Tourism and Commerce made a press release announcing that it had completed the Remuneration Pre-Assignment registration for renewable electric energy installations. ¹⁰⁶ According to this press release, for thermosolar technology, a total of 56 applications with a total capacity of 2,339.89 MW had been registered in four different phases. The press release included a statement which reads that:

“Completion of the pre-registration stage confirms the Government's commitment to provide the sector with visibility and long-term stability, making the huge development of these technologies compatible with their secure integration in the system with an acceptable impact on electricity prices” [Emphasis added]

July 2, 2010 Official Press Release

191. Since April 2010, the Ministry of Industry, Tourism and Commerce had been discussing with the wind and thermosolar industry associations regarding possible modifications to be made to the remuneration framework applicable to them. ¹⁰⁷ On July 2, 2010, the Ministry of Industry, Tourism and Commerce issued a press release (“July 2, 2010 Press Release”) announcing that the Ministry had closed an agreement with the wind and thermosolar energy sectors to revise their remuneration frameworks (“Industria cierra con los sectores

¹⁰⁵ Official Press Release of the Council of Ministers of November 13, 2009. (C-0138t) ↩
¹⁰⁶ Official Press Release of the Ministry of Industry, Tourism and Commerce of December 15, 2009 (C-0132t) ↩
¹⁰⁷ Cl. Mem., paras. 355 through 375. ↩

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eólico y termosolar un acuerdo para revisar sus marcos retributivos”) (“July 2, 2010 Agreement"). ¹⁰⁸

192. The July 2, 2010 Press Release stated that the agreement between the Ministry of Industry, Tourism and Commerce and the wind and thermosolar energy industry representatives, i.e., Spanish Wind Energy Association (AEE) and the Spanish Thermosolar Industry Association (Protermosolar), included:

“short-term measures that will reduce the impact of these technologies on the price of electricity as well as long-term measures which will provide these technologies with stability and certainty for their future development”. ¹⁰⁹ [Emphasis added]

193. Specifically, with respect to the CSP sector, the announced measures included the following: (i) CSP plants would be prevented from opting for the pool price plus premium (FiP) option for one year of operation, in which they would only be able to access the regulated tariff (FiT) established in RD 661/2007, of a lower value; (ii) the entry into operation of the CSP facilities would also be delayed per the July 2, 2010 Agreement; and (iii) the number of hours entitled to the remuneration above the market price is limited for the calculation of the facilities' profitability.

194. The July 2, 2010 Press Release stated that this agreement did not compromise the profitability of existing facilities. It also stated that:

“[t]his agreement strengthened the visibility and stability of the regulation of these technologies for the future, guaranteeing the premiums and tariffs of RD 661/2007 for facilities in operation (and for those included in the pre-register) after 2013. "¹¹⁰ [Emphasis added]

¹⁰⁸ Press release issued by the Ministry of Industry, Tourism and Commerce, July 2, 2010. (C-0040/C-0040t). Also, (C-0213) email of July 2, 2010 from the Director-General for Energy Policy and Mining (Mr. Antonio Hemández García) to Dr. Luis Crespo (Secretary General of Protermosolar, the association of companies with interests in the CSP subsector in Spain to which Abengoa belongs) of July 2, 2010 at 22:00 confirming the text of the Agreement). CWS-LC, para. 71; CWS-ES, para. 58; email from Mr. Eduard Soler Babot to Dr. Luis Crespo of July 2, 2010 (C- 0223/C-0223t) and email from Dr. Luis Crespo to Mr. Eduard Soler Babot of July 2, 2010 (C-0224/C-0224t). The Parties disagree on the legal nature of what was announced by the Ministry on July 2, 2010. The Claimant submits that it is a binding a greement between the Ministry and the industry associations, while the Respondent contends that it is a part of the public consultation process and as such is not legally binding. For convenience reasons only, the Tribunal will use the term "July 2, 2010 Agreement”, but the use of this term should not be viewed as the Tribunal's determination of the legal nature thereof. ↩
¹⁰⁹ (C-0040/C-0040t) ↩
¹¹⁰ Id. ↩

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195. Finally, it indicated that the Ministry would immediately begin the process which would allow the contents of the agreement to be converted into a law.

196. On the same day (July 2, 2010), Protermosolar representing the thermosolar sector issued a press release confirming that it had entered into the agreement with the Ministry of Industry, Tourism and Commerce. ¹¹¹ This press release, titled as “The Thermosolar sector reaches an agreement with MITyC that contributes to cost savings in the electric sector while assuring stability and transparency in the regulatory framework”, indicated the CSP industry's understanding of what was agreed by the July 2, 2010 Agreement. ¹¹² It quoted the statement of Valeriano Ruiz, the President of Protermosolar, which reads as follows:

“[t]he Thermosolar al [sic] sector has made a significant effort to contribute to saving costs in the electrical system during the 2010-2013 period without compromising the stability and transparency of the regulatory framework which is essential to ensure economic development and job creation in a key innovative sector. This agreement brings an end to the uncertainty regarding the sector's regulation". [Emphasis added]

197. On July 8, 2010, Rosa Francisca Gutiérrez Pérez, on behalf of Mr. Antonio Hernández (Director General of Energy Policy and Mines of Ministry of Industry, Tourism and Commerce) sent an email to Dr. Luis Crespo of Protermosolar, attaching a document titled as “Acuerdo Con el Sector Termosolar” in Spanish (the Agreement with the thermo-solar sector). At the top of the first page of this document, the logos of the Ministry of Industry, Tourism and Commerce and Protermosolar were displayed (in Spanish, MINISTERIO DE INDUSTRIA, TURISMO Y COMERCIO and PROTERMOSOLAR). ¹¹³

198. This document started with the statement that “The MITYC (Spanish, Ministry of Industry, Turism [sic] and Commerce) has reached an agreement with the thermosolar sector by which the promotion of the following actions is undertaken.” It then listed seven agreed items including (i) elimination of the market plus premium option for one year; (ii) the sectors' commitment to delay the entry into operation of several of the plants listed in the attached list; (iii) amendment of Article 44(3) of RD 661/2007 establishing that any future revisions of the premiums and upper and lower limits would not affect existing facilities

¹¹¹ Press release issued by Protermosolar, July 2, 2010 (C-0222/C-0222t); CWS-ES, para. 58. ↩
¹¹² (C-0222/C-0222t) ↩
¹¹³ Email from Mr. Antonio Hernández García to Dr. Luis Crespo of July 8, 2010. (C-0219/C-0219t) ↩

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or those already entered in the Pre-Assignment Register; (iv) the limit of the number of equivalent hours of operation with the right to the tariff; (v) that “the conditions of this agreement that are legally suitable will be reflected in the administrative decisions corresponding to each facility”; (vi) introduction of administrative control over changes of plant ownership; and (vii) return of bonds.

199. In particular, item 3 among the agreed items list reads as follows:

“3. Amendment of Section 44.3 of Royal Decree 661/2007 establishing that any future revisions of the premiums will not affect existing facilities, as it currently established for regulated tariffs, and upper and lower limits, nor those that at the time of approval of the review were already entered in the Feed-in Tariff Pre- assignment Registry created by Royal Decree-Law 6/2009, April 30, or that were definitively entered in the REPE prior to May 6 2009. "¹¹⁴ [Emphasis added]

200. At the end of the main text, the following statement was included in bold and capitalized letters:

"THE LEGAL INSTRUMENT EMBODYING THIS AGREEEMENT SHALL BE PREVIOUSLY SAHRED (sic) WITH THE SECTOR BEFORE THE APPOVAL (sic) PROCESS THEREOF IN (sic) COMMENCED.” (In Spanish Original, EL TEXTO NORMATIVO QUE SE DERIVE DE ESTE ACUERDO SERÁ COMPARTIDO PREVIAMENTE CON EL SECTOR ANTES DEL INICIO DE SU TRAMITACIÓN.)

201. The Appendix to this document titled as “Limitation to the entry into operation” listed Solacor 1 and Solacor 2 together with other CSP producers which made firm commitment to delay their respective entry into operation.

Royal Decree 1565/2010

202. On November 19, 2010, the Respondent passed Royal Decree 1565/2010 (“RD 1565/2010”), which regulates and modifies certain aspects of the electricity production activities under the Special Regime regarding the Feed-in remuneration scheme applicable to the PV subsector. ¹¹⁵

¹¹⁴ Id. ↩
¹¹⁵ RD 1565/2010, November 19, 2010. (C-0078) (R-0087) ↩

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Royal Decree 1614/2010

203. On December 7, 2010, the Respondent enacted Royal Decree 1614/2010 (“RD 1614/2010”), regulating and modifying certain aspects of the activity of electrical power production through solar thermo-electric and wind technologies. ¹¹⁶ RD 1614/2010 took effect on December 9, 2010.

204. Noting that the growth of wind, thermal solar and photovoltaic technologies was especially remarkable, having reached and even surpassed the installed power objectives planned for the year 2010, the preamble of RD 1614/2010 stated the reasons for this legislation in the following words:

“the support system, as it was drafted, must be adapted, safeguarding the legal security of the investments and the principle of reasonable return, to the dynamic reality of the learning curves of the different technologies and the technical constraints that have emerged with the increased penetration of these technologies in the power generation mix, in order to maintain an adequate and necessary support system that is consistent with market conditions and the strategic energy objectives and that contributes to transferring the gain from the appropriate development of these technologies to society. ”¹¹⁷

205. The preamble further stated that it aimed to resolve certain inefficiencies in the implementation of RD-L 6/2009 for wind and thermosolar technologies.

206. RD 1614/2010 incorporated the contents of the July 2, 2010 Agreement announced by the Ministry of Industry, Tourism and Commerce. For instance, with respect to the CSP facilities, RD 1614/2010 stipulated a one year compulsory application of the regulated tariff only. ¹¹⁸ In return, it raised the limit of the percentage of electric energy generated from back-up fuel from 12% to 15% during this period. ¹¹⁹

¹¹⁶ RD 1614/2010, December 7, 2010. (C-0039) (R-0088) ↩
¹¹⁷ (C-0039t), Preamble. ↩
¹¹⁸ (C-0039t)(R-0088EN), Article 3(1) of RD 1614/2010. ↩
¹¹⁹ Ibid., Article 3(3). ↩

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207. RD 1614/2010 included a limitation to 2,855 of the number of equivalent hours of operation entitled to the premium or premium equivalent CSP plants using parabolic trough technology, with no storage (the category to which Solacor 1 and Solacor 2 belong). ¹²⁰

208. Article 4 of RD 1614/2010 set out the principle of non-retroactivity as follows:

“For thermosolar technology facilities under Royal Decree 661/2007, of May 25, the revisions of tariffs, premiums and lower and upper limits, to which Article 44.3 of said Royal Decree refers, shall not affect those facilities finally registered in the administrative Register of power production facilities under the special regime of the General Directorate of Energy Policy and Mining as of May, 7 2009, nor to those facilities pre-registered on the remuneration pre-allocation Register pursuant to the Fourth Transitional Provision of Royal Decree-Law 6/2009 of April 30... "¹²¹ [Emphasis added]

209. The Council of Ministers Reference issued by the Secretariat of State for Communication dated December 3, 2010, announcing the approval of RD 1614/2010, explained RD 1614/2010 as follows:

“The new regulations, which were agreed with both sectors last July, have the main objectives of obtaining savings to benefit consumers and to make the objectives of promotion of renewable energies compatible with those of limiting electricity production costs to guarantee the sustainability of the electricity system.

The regulation also involves reinforcement of the visibility and stability of the regulation of these technologies in the future, and guarantees the present premiums and tariffs of Royal Decree 661/2007 as of 2013 for installations in operation and for those included on the pre-register. "¹²² [Emphasis added]

Royal Decree-Law 14/2010

210. About two weeks after RD 1614/2010 took effect, the Respondent passed Royal Decree- Law 14/2010, on December 23, 2010 (“RD-L 14/2010”), establishing urgent measures to correct the tariff deficit in the electricity sector, and major changes to the regulatory framework applicable to the PV subsector. ¹²³

¹²⁰ Ibid., Article 2. P. Mir, “La regulación fotovoltaica y solar termoeléctrica en España”, p. 199(C-0045/C-0045t): "One of the key points of such regulation was to limit the number of operating hours entitled to premium, establishing up to eight categories of solar thermal power generation”; P. Mir, Economía de la Generación Eléctrica Solar, p. 457 (C-0030/C-0030t). ↩
¹²¹ (R-0088EN) ↩
¹²² Council of Ministers Reference, December 3, 2010, p. 3. (C-0277/C-0277t) ↩
¹²³ RD-L 14/2010, December 23, 2010. (C-0236t) (R-0073EN) ↩

[Page 49]

211. RD-L 14/2010 increased the maximum tariff deficit cap as established by RD-L 6/2009 for years 2011 and 2012 in view of the impossibility of meeting the previous limits. It also introduced cuts to the number of hours for which PV facilities would benefit from the tariffs of the RD 661/2007 Special Regime. ¹²⁴

Royal Decree-Law 1/2012

212. On December 19, 2011, Mariano Rajoy made the following remarks on the reform of the Spanish electricity system in his inaugural speech as the President of the Spanish Government:

“It is important for us to realise Spain has a major energy problem, especially in the electricity sector, with an annual deficit in excess of 3,000 million Euros, and an accrued tariff deficit of more than 22,000 million. Electricity tariffs for domestic consumers are the third most expensive in Europe, and the fifth highest for industrial consumers.

[...]

If reforms are not made, the imbalances will be unsustainable, and increases in prices and tariffs will place Spain at the greatest disadvantage in terms of energy costs in the entire developed world. We must therefore introduce policies based on putting a brake on and reducing the average costs of the system, take decisions without demagoguery, employ all the technologies available, without exception, and regulate with the competitiveness of our economy as our prime objective.” ¹²⁵

213. Against this background, on January 27, 2012, the new Spanish Government passed Royal Decree-Law 1/2012(“RD-L 1/2012”), which suspended the remuneration pre-assignment procedures and eliminated economic incentives for new electric energy production plants based on renewable energy sources. ¹²⁶ According to the Respondent, this was the first measure adopted with the rank of law relating to the reform of the electricity sector. ¹²⁷

214. The preamble of RD-L 1/2012 stated that the growth of technologies under the Special Regime made it possible to far exceed the installed capacity targets for 2010 under the 2005-2010 Energy Plan as regards wind and particularly solar thermoelectric and solar photovoltaic technologies and that exceeding the objectives revealed an imbalance between

¹²⁴ (C-0236t) (R-0073EN), First Additional Provision of RD-L 14/2010. ↩
¹²⁵ (R-0173EN) ↩
¹²⁶ See Articles 3 and 4 of RD-L 1/2012, January 27, 2012. (C-0359) (R-0074). ↩
¹²⁷ Resp. C-Mem., para. 734. ↩

[Page 50]

production costs and the value of premiums, with an additional cost for the system of more than 2 billion euros stemming from solar technology premiums in 2010. Noting that as from 2014, this figure would increase annually by 2 billion euros, the preamble further stated that the measures previously adopted such as RD-L 6/2009 and RD-L 14/2010 so far had not been sufficient and the final purpose of eliminating the tariff deficit as from 2013 was still in jeopardy.

215. The preamble of RD-L 1/2012 further explained the background of this legislation in the following words:

“it was considered appropriate to withdraw the economic incentives for certain special regime facilities and for certain ordinary regime facilities using similar technologies, as well as to suspend the remuneration pre-allocation procedures established for them, in order to address the problem of the electricity sector high tariff deficit in a more favourable environment. By adopting this measure, the Government has chosen to limit its scope to special regime facilities not yet registered in the Remuneration Pre-Allocation Registry, except where such condition is due to the Administration's failure to comply with the relevant time limit for making a decision. ”¹²⁸ [Emphasis added]

216. However, RD-L 1/2012 maintained “the remuneration regime established in the legal system for facilities already in operation and for those already registered on the Remuneration Pre-Allocation Registry." ¹²⁹

217. The preamble of the RD-L 1/2012 signalled an introduction of a new remuneration model taking into the new economic system as follows:

“It is necessary to design a new remuneration model for these technologies taking into account the new economic situation and encouraging an efficient allocation of resources through market mechanisms. The aim is to create a system that fosters market competition through mechanisms similar to those used in other European Union Countries while ensuring the future viability of the system. "¹³⁰ [Emphasis added]

¹²⁸ (C-0359t) ↩
¹²⁹ Id. ↩
¹³⁰ Id. ↩

[Page 51]

CNE Report 2/2012

218. On March 7, 2012, CNE issued the Report 2/2012 (“CNE Report 2/2012") ¹³¹ in response to the request of the Spanish Government on January 27, 2012 for a report on regulatory adjustment measures aimed at tackling the tariff deficit in the electricity sector.¹³² After describing the then current situation, this report proposed a series of measures with a short term economic impact on the tariff deficit and a medium term economic impact and efficiency improvements.

219. With respect to solar thermal technology, one of the approaches this CNE Report proposed was a reduction by 12% of the premium of the facilities that were already pre-registered, which would allow savings of about EUR 47 million in 2012, EUR 90 million in 2013 and EUR 200 million as of 2014. ¹³³ The report also proposed a reduction of the rate of using back-up fuel to 5%. ¹³⁴

National Reform Programme of 2012 and IMF Consultation

220. On April 27, 2012, the Spanish Government approved the National Reform Programme, which set out a broad economic strategy to address the economic and financial crisis in Spain and the growing public debt. The tariff deficit in the electricity sector was also addressed therein. The 2012 National Reform Programme noted that there was an imbalance between the costs and the revenues of the electricity sector with the accumulated tariff deficit in the electricity sector having reached EUR 24,000 million ¹³⁵, and that the Spanish Government was committed to eliminating the tariff deficit by equally distributing burdens amongst consumers and the public and private sectors as part of a comprehensive reform of the electricity sector which should involve cost reduction measures for regulated activities and the establishment of a stable regulatory framework. The premium for the

¹³¹ CNE, Report on the Spanish Energy Sector, March 7, 2012. (R-0113EN) ↩
¹³² Resp. C-Mem., para. 738. ↩
¹³³ (R-0113EN), Section 3.2 of the CNE Report 2/2012. ↩
¹³⁴ Ibid., Section 3.3. ↩
¹³⁵ National Reform Program of 2012, p. 207. (R-0103EN) ↩

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Special Regime was identified as one of the most significant costs of the electricity system. ¹³⁶

221. On June 14, 2012, the International Monetary Fund (“IMF”) delivered the “2012 Article IV Consultation with Spain -- Concluding Statement of IMF Mission. Madrid, June 14, 2012"¹³⁷, stating, under section 19, that:

“The implementation of the other planned structural reforms will be important to complement labor reform [...] and the government's reform agenda is adequately focused on eliminating the tariff deficit. It would be important for these reforms to be implemented quickly and effectively - a detailed and ambitious timetable would help in structuring and communicating efforts. "¹³⁸

Memorandum of Understanding between the Kingdom of Spain and the European Union

222. On July 20, 2012, a Memorandum of Understanding was signed between the Kingdom of Spain and the European Union. ¹³⁹ The Memorandum expressly mentioned the need to “address the electricity tariff deficit in a comprehensive way” ¹⁴⁰

223. On September 27, 2012, the Spanish Government, by means of the Council of Ministers, adopted the "Spanish economic policy: Balance sheet and structural reforms for the next half-year". ¹⁴¹ This document clearly indicated the direction of the new government's reform of the electricity sector. With respect to the energy reform, it stated that forthcoming measures would include (i) adoption of “structural measures to correct the tariff deficit in permanent manner, by enacting the Act on Fiscal Measures for Energy Sustainability (4th Quarter 2012)”; and (ii) presentation of “a new Electricity Sector Act, in order to progress with liberalisation of the sector, improve consumer protection and resolve inefficiencies detected based on accumulated experience (1st Quarter 2013)”. ¹⁴²

¹³⁶ Ibid., p. 208. ↩
¹³⁷ "Consultations of Article IV with Spain, Final Statement of the FMI Mission, Madrid, 14 June 2012" International Monetary Fund. (R-0177) ↩
¹³⁸ Footnote 509 of Resp. C-Mem., citing (R-0177). The Tribunal notes that the quoted portion is not exactly the same as the English translation in (R-0177EN). ↩
¹³⁹ Memorandum of Understanding on Financial-Sector Policy Conditionality. (RL-0050) ↩
¹⁴⁰ Ibid., at page 15. ↩
¹⁴¹ (R-0104) ↩
¹⁴² (R-0104EN), p. 3. ↩

[Page 53]

224. In September 2012, the Spanish Government delivered the document “The Spanish Government's reforms. Determination in response to the crisis”. ¹⁴³ With regard to the reform of the energy sector, this document stated that:

“The reform of this sector will shortly be approved, through the Draft Bill on Energy Reform, for the purpose of not getting the cost of energy to condition the competitiveness of our economy so much. This aims at providing a final solution to the problem of the hefty tariff deficit of our energy system. ”¹⁴⁴

Law 15/2012

225. On December 27, 2012, the Respondent enacted Law 15/2012 which entered into force on January 1, 2013 (“Law 15/2012") on fiscal measures for energetic sustainability. ¹⁴⁵ Law 15/2012 introduced two major changes to the remuneration regime applicable to CSP producers under the Special Regime of RD 661/2007 as modified by RD 1614/2010. It eliminated the feed-in remuneration regime for the production of electricity attributable to the use of LNG as back-up fuel starting from January 1, 2013. ¹⁴⁶ Another important change was the introduction of a 7% charge on the value of the electric power production (“TVPEE” or “7% charge”).

226. This Law levied TVPEE on the production of all electricity generation facilities. The preamble of Law 15/2012 stated that this reform “contributes to the integration of environmental policies into our tax system in which there may be both specifically environmental taxes while the environmental element may also be [sic] incorporate into other pre-existing taxes.” ¹⁴⁷

RD-L 2/2013

227. On February 1, 2013, the Respondent approved Royal Decree-Law 2/2013 (“RD-L 2/2013"), on urgent measures in the electric system and the financial sector to guarantee budget stability and encouragement of competition. ¹⁴⁸ RD-L 2/2013 introduced further

¹⁴³ (R-0155EN) ↩
¹⁴⁴ Ibid., p. 17. ↩
¹⁴⁵ Law 15/2012, December 27, 2012. (C-0372) (R-0030) ↩
¹⁴⁶ (C-0372t), p. 8. A section 7 is added to Article 30 of Law 54/1997. ↩
¹⁴⁷ (R-0030EN), Section I of the Preamble. ↩
¹⁴⁸ RD-L 2/2013, February 1, 2013. (C-0373) (R-0077). ↩

[Page 54]

changes to the remuneration of the Special Regime. It replaced, with effect from January 1, 2013, the Consumer Price Index (“CPI”) that governed the updating of the remunerations, tariffs and premiums of activities of the electricity sector, including the production of renewable energy, by another consumer price index which excluded unprocessed food or energy products (“IPD-IP”). It also reduced the amount of the premium to a value in the remunerative pool plus premium option prescribed in RD 661/2007 to zero and supressed the upper limit and lower limit values.

228. The preamble of RD-L 2/2013 explained that the replacement of the CPI with IPD-IP was "with the purpose of using a more stable index which is not affected by the volatility of unprocessed foodstuff price no [sic] those from domestic fuels.”¹⁴⁹

229. The preamble of RD-L 2/2013 stated the purpose of the reduction of the premium as follows:

“taking into account the volatility of the market production price, the remuneration option for energy generated under the premium special regime which supplements the aforementioned price, makes it difficult to comply with the dual objective of guaranteeing reasonable profitability for these facilities and, at the same time, avoid their over-remuneration, which would fall on the other parties subject to the electricity system”.

“Thus, the premium economic regime must sustain itself solely on the regulated tariff option, without prejudice to the fact that the owners of the facilities may sell their energy freely in the production market without receiving a premium. "¹⁵⁰ [Emphasis added]

230. Under RD-L 2/2013, the Special Regime producers which previously had opted to sell their energy under the FiP option would be deemed subject to the Regulated Tariff (FiT) option as of February 2, 2013 with effect from January 1, 2013, unless they notified the Government that they desired to opt for the FiP option, in which case they would not be allowed to opt for the FiT option subsequently.¹⁵¹

¹⁴⁹ (C-0373t) ↩
¹⁵⁰ Id. ↩
¹⁵¹ Ibid., Article 3. ↩

[Page 55]

231. The Respondent implemented the changes introduced by RD-L/2013 through the approval of MO IET/221/2013.¹⁵²

Royal Decree-Law 9/2013

232. On July 12, 2013, the Respondent enacted Royal Decree-Law 9/2013 (“RD-L 9/2013”), establishing urgent measures to ensure the financial stability of the electricity system.¹⁵³ RD-L 9/2013 went into effect on July 14, 2013.

233. Amending, among others, Article 30.4 of EPA 1997 and repealing RD 661/2007 and certain provisions of RD-L 6/2009¹⁵⁴, RD-L 9/2013 introduced a new remuneration model (the "New Remuneration Model”) based upon the concept of the "efficient and well- managed standard facilities” and the “reasonable rate of return” to be determined by the regulators. RD-L 9/2013 empowered the Government to approve a new legal and economic regime for existing electric energy production facilities using renewable energy sources.

234. The preamble of RD-L 9/2013 stated that the Spanish electricity system had generated a tariff deficit for a decade, due to the fact that the actual costs related to regulated activities and the operation of the electricity sector were higher than the collection of the tolls set by the Government, which were paid by consumers. Noting that among the cost headings that had contributed the most to the increase were the Special Regime premiums and the annuities of accumulated deficits, the preamble stated that these figures testified to the unsustainable nature of the deficit of the electricity sector and the need to adopt urgent measures of an immediate effect that would put an end to this situation.

235. The preamble of RD-L 9/2013 further stated that:

“These circumstances are proof of the imperative need to take immediately a series of urgent measures to ensure the financial stability of the electricity system, as well as the need to undertake a review of the regulatory framework that allows for its adaptation to the events that define the reality of the sector in each of the periods specified in the interest of maintaining the sustainability of the electricity system. ”

¹⁵² Ministerial Order IET/221/2013 of February 14, 2013.(C-0374/C-0374t); Cl. Mem., paras. 681-683. ↩
¹⁵³ RD-L 9/2013, July 12, 2013 (BOE, July 13, 2013). (C-0386) (R-0024) ↩
¹⁵⁴ Ibid., Single repealing provision of RD-L 9/2013. ↩

[Page 56]

236. The preamble explained that RD-L 9/2013 articulated, as a matter of urgency, a series of measures that were balanced, proportionate and wide-ranging, aimed at ensuring the financial stability of the electricity system as indispensable premise of its economic sustainability and the security of its supply, and addressed at all the activities of the electricity sector.

237. According to the preamble, the new framework articulated a remuneration that should allow renewable energy, cogeneration, and waste facilities to cover the costs necessary to compete in the market at an equal level with the rest of technologies and get a reasonable return using a concept of a standard facility being an efficient and well-managed producing company.

238. Under the New Remuneration Model, a specific remuneration (“Specific Remuneration") was exceptionally granted only if it was necessary for the installation to participate in the market and to recover the costs that the market price alone could not remunerate. Specifically, RD-L 9/2013 amended a number of provisions of Law 54/1997. One of the key features of RD-L 9/2013 was an amendment made to Article 30(4) of Law 54/1997. The amendment, in pertinent part, read as follows:

“4. Additionally, and in the terms determined legally by Royal Decree of the Council of Ministers, for the remuneration for the sale of the energy generated, valued at market price, the facilities shall be able to receive a specific remuneration made up of one term per power unit installed, that covers, when appropriate, the investment costs of standard facility that cannot be recovered by the sale of energy and an end to the operation that covers, as applicable, the difference between the operating costs and revenue by participation in the market of such standard facility.

For purposes of calculating this specific remuneration, the Law shall consider the following for any standard facility throughout its useful life and in reference to the business activity carried out by an efficient and well-managed company:

a) The standard revenue for the sale of the energy generated, valued at the production market price.

b) The standard operating costs.

c) The standard value of the initial investment.

(...)

[Page 57]

This remuneration scheme does not exceed the minimum level necessary to cover the costs that allow for the facilities to compete equally with the rest of technologies in the market and that would lead to a reasonable rate of return by reference to the standard facility applicable in each case. Notwithstanding the foregoing, exceptionally the remuneration scheme may also include an incentive for investment and the execution within a specific time period when the facility in question involves a significant reduction of costs in the insular and extra- peninsular systems.

This reasonable rate of return shall focus, before tax, on the average yield in the secondary market of the Obligations of the State within ten years by applying the appropriate differential.

The parameters of the remuneration scheme may be revised every six years. ”¹⁵⁵ [Emphasis added]

239. The preamble elaborated that:

“In order to calculate the specific remuneration the following shall be considered for a standard facility: the proceeds from the sale of the energy generated, valued at the market production price, the medium operating that are necessary to carry out the activity, and the value of the initial investment of the standard facility, all of this for an efficient and well-managed company. This establishes a remuneration scheme on standard parameters per the various standard facilities that are established. "¹⁵⁶ [Emphasis added]

240. Under the amended Article 30(4), facilities under the Special Regime could only receive a payment additional to the market value of electricity calculated on the basis of the reasonable rate of return. The previous option to choose between the FiT and FiP options were eliminated. Moreover, such additional payment (i) would be calculated by reference to the costs of a standard facility, as determined by the Government, and by reference to the activity carried out by an efficient and well-managed business, and (ii) would in no case surpass the minimum level required for facilities to obtain a reasonable rate of return, based on the return on state bonds in the secondary market. Moreover, the parameters of the remuneration regime may be reviewed and revised every six years.

241. RD-L 9/2013 applied to both existing and new facilities. However, with respect to the existing facilities that had a right to the feed-in tariff scheme as of the effective date of RD- L 9/2013, it provided that:

¹⁵⁵ (R-0024EN) ↩
¹⁵⁶ Id. ↩

[Page 58]

"...for the facilities that as of date of the entry into force of this Royal Decree law have the right to a feed-in tariff scheme, the reasonable rate of return shall focus, before taxes, on the average yield in the secondary market for ten years prior to the entry into force of this Royal Decree-Law of the Obligations of the State within ten years increased by 300 basic points...”¹⁵⁷ [Emphasis added]

242. RD-L 9/2013 stated that a royal decree should be approved by the Government at the proposal of the Minister of Industry, Energy and Tourism setting forth details of the legal and economic schemes for electricity production facilities from renewable sources of energy with feed-in remuneration which would amend the remuneration model of the existing facilities. ¹⁵⁸

243. RD-L 9/2013 provided that the New Remuneration Model would be applicable with immediate effect (from the entry into force of this Royal Decree-Law, i.e., as of July 14, 2013)¹⁵⁹.

IDAE Tender

244. On July 23, 2013, IDAE tendered its terms and conditions for “Contracting of Specialized Assistance Services to the Ministry of Industry, Energy and Tourism". ¹⁶⁰ This was in response to the call on the IDAE by the Department of Energy of the Ministry of Industry, Energy and Tourism to urgently produce a study evaluating and establishing investment and operational cost standards for electricity generation technologies operating under the Special Regime in connection with the New Remuneration Model in the new regulation.

245. The specification in the terms and conditions included a special requirement in its description of the scope of the service in anticipation of potential legal disputes as follows:

“The awarding of this service is dependent on a performance commitment and guarantee on the part of the company or companies selected to provide the technical support required by the IDAE AND THE MINISTRY OF INDUSTRY, ENERGY AND TOURISM IN ANY LEGAL AND/OR ARBITRATION PROCEEDINGS TO WHICH THE GENERAL STATE ADMINISTRATION MIGHT BE PARTY, by defending the data, hypotheses, calculations, results, conclusions and other relevant elements proposed in their reports, in the

¹⁵⁷ Ibid., First Additional Provision (Reasonable profitability of production facilities with the right to feed-in tariff scheme) of RD-L 9/2013. ↩
¹⁵⁸ Ibid., Second Final Provision of RD-L 9/2013. ↩
¹⁵⁹ Id. ↩
¹⁶⁰ IDAE's Technical Terms & Conditions. (C-0645) ↩

[Page 59]

aforementioned proceedings, when so required by the IDAE and/or the MINETUR, and on the terms established at the time in question by means of the processing of the relevant procurement case or cases. "¹⁶¹[Emphasis from the translation which reflected the emphasis in the Spanish original]

246. On November 28, 2013, IDAE issued its Resolution awarding the contracts to The Boston Consulting Group, S.L. (“BCG”) and Roland Berger Strategy Consultants, S.A. (“RB”).

Law 24/2013

247. On December 26, 2013, the Respondent enacted Law 24/2013, on the Electricity Sector (“EPA 2013” or “Law 24/2013”). ¹⁶² This law, which superseded Law 54/1997, went into effect on December 28, 2013.¹⁶³

248. Law 24/2013 eliminated the distinction between the Ordinary Regime and the Special Regime under the previous regime. Under Law 24/2013 the renewable energy producers became exclusively subject to the new regime created by RD-L 9/2013. It also eliminated the right of priority of grid access and priority of dispatch for facilities under the previous Special Regime.

249. The preamble of EPA 2013 explained that a decisive element for undertaking this reform was, among others, “the accumulation during the last decade of annual imbalances between the income and costs of the electrical system which has brought about the appearance of a structural deficit”. Adding that “the failure to correct the imbalance has introduced the risk of the bankruptcy of the electrical system", the preamble stated that:

“Law 54 enacted on November 27th 1997 has proven insufficient to ensure the financial balance of the system, amongst other reasons because the remuneration system for regulated activities has lacked the flexibility required for its adaptation to major changes in the electrical system or in the evolution of the economy. "¹⁶⁴ [Emphasis added]

250. The preamble further explained the background of this legislation in the following words:

¹⁶¹ (C-0645t), Section 3. Scope of Service. ↩
¹⁶² Law 24/2013, December 26, 2013. (C-0377) (R-0048) ↩
¹⁶³ Ibid., Law 24/2013, Final provision six. ↩
¹⁶⁴ (R-0048EN) ↩

[Page 60]

“The widespread awareness of the tariff deficit situation and the consequent threat to the very feasibility of the electrical system has led to the need to make major changes to the remuneration regime for regulated activities.

In view of the progressive deterioration in the sustainability of the electrical system, the legal entities in the latter could no longer legitimately trust the maintenance of the parameters which had degenerated into the situation described and any diligent operator could anticipate the need for these changes. ” [Emphasis added]

251. The preamble of EPA 2013 repeated what was stated in RD-L 9/2013 as follows:

“The remuneration regime for renewable energies... will be based on the necessary participation in the market of these installations, complemented by market income with specific regulated remuneration which enables these technologies to compete on an equal footing with the other technologies on the market. This specific complementary remuneration will be sufficient to attain the minimum level required to cover any costs which, by contrast to conventional technologies, they cannot recover on the market and will allow them to obtain a suitable return with reference to the installation type applicable in each case. [Emphasis added]

252. With respect to the new remuneration regime, the preamble explains that:

“For activities with regulated remuneration, the Law reinforces and clarifies the principles and criteria for establishing the remuneration regimes to which end the necessary costs will be considered to carry out activity by an efficient, well- managed company through the application of homogeneous criteria throughout Spain. These economic regimes will allow appropriate returns to be obtained with regard to the activity risk. ” [Emphasis added]

253. The preamble further stated that:

“The remuneration regime for renewable energies... will be based on the necessary participation in the market of these installations, complemented by market income with specific regulated remuneration which enables these technologies to compete on an equal footing with the other technologies on the market. This specific complementary remuneration will be sufficient to attain the minimum level required to cover any costs which, by contrast to conventional technologies, they cannot recover on the market and will allow them to obtain a suitable return with reference to the installation type applicable in each case. [Emphasis added]

254. The guiding principle of EPA 2013 was the principle of economic and financial sustainability of the electrical system which “will be taken to mean the capacity to meet all

[Page 61]

the costs thereof in accordance with that set out in this Law and in its implementing regulations." ¹⁶⁵

255. Article 14(7) of EPA 2013 set out the basic parameters to calculate the “reasonable rate of return" along the lines enunciated by RD-L 9/2013 as follows¹⁶⁶:

“b) To calculate said specific remuneration, for an installation type, throughout its regulatory working life and with reference to the activity carried out by an efficient, well-managed company, the figures set out below will be assumed:

i. Standard income from the sale of energy generated, valued at the production market price.

ii. The standard operating costs.

iii. The standard initial investment figure.

The remuneration regime will not exceed the minimum level required to cover costs which allow production installations from renewable energy sources, high- efficiency and waste cogeneration to compete on an equal footing with the other technologies on the market and which allows a reasonable return to be earned on the installation type in each applicable case. This reasonable return will refer, before tax, to the mean yield on the secondary market for Ten-Year State Bonds, applying the appropriate differential.

[...]

d) Electrical energy imputable to the use of a fuel at a generation installation which uses as its primary energy any of the non-consumable renewable energies will not be subject to a specific remuneration regime...

With this in mind, by order of the Minister of Industry, Energy and Tourism the methodology will be published for calculating the electrical energy imputable to the fuels used." [Emphasis added]

256. EPA 2013 provided that irrespective of the starting date of each of the activities, the first regulatory period would end on December 31, 2019, and as from January 1, 2020 the following regulatory periods would occur consecutively.¹⁶⁷ With respect to production from renewable energy sources with the new specific remuneration regime, it provided that the first regulatory period would start on the date of the coming into force of RD-L 9/2013.

¹⁶⁵ Ibid., Article 13 (1). ↩
¹⁶⁶ Ibid., Article 14(7). ↩
¹⁶⁷ Ibid., Additional Provision Ten, Section 1. ↩

[Page 62]

257. By the time both RD-L 9/2013 and EPA 2013 were adopted, the Respondent had yet to formulate a new legal and economic regime applicable to renewable energy facilities. Thus, until the new regime would be adopted in the ensuing months, it was stipulated that the feed-in tariff continued to apply and the payments received during such time would be discounted from any special payment to be received once such special payments would be defined at some later date in the new regime.

Royal Decree 413/2014

258. On June 6, 2014, Royal Decree 413/2014 (“RD 413/2014”), which regulated the production of electrical energy from renewable energy sources, cogeneration and waste was approved.¹⁶⁸ This RD went into effect on June 11, 2014. ¹⁶⁹

259. RD 413/2014 set out in greater detail the methods governing the new Specific Remuneration frameworks for renewable energies in order to implement the provisions of RD-L 9/2013 and EPA 2013.

260. The remuneration framework laid down in RD 413/2014 was composed of compensation for investments and compensation for operations applicable to a standard facility. RD 413/2014 provided that the applicable compensation benchmarks would be set forth in a ministerial order issued by the Ministry of Industry, Energy and Tourism once approved by the Government's Executive Committee for Economic Affairs ¹⁷⁰, and thereby granted the regulator the power to determine by way of a Ministerial Order the remuneration parameters for “standard installations” that would be applicable to existing installations. ¹⁷¹

261. The preamble offered key features of RD 413/2014 as follows:¹⁷²

“Under the new framework, in addition to the remuneration earned by selling energy at market rates, facilities may also receive specific remuneration throughout their regulatory useful lives. This specific remuneration comprises an amount per unit of installed capacity, intended to cover any investment costs

¹⁶⁸ RD 413/2014, June 6, 2014. (C-0388) (R-0093) ↩
¹⁶⁹ RD 413/2014, Eighth Final Provision. RD 413/2014 was published on June 10, 2014 on the official gazette of the Respondent. (R-0093EN) ↩
¹⁷⁰ (R-0093EN), RD 413/2014, Articles 12(2) and 13 (1) and (2). ↩
¹⁷¹ Ibid., Second Additional Provision, para. 5 of RD 413/2014. ↩
¹⁷² (R-0093EN) ↩

[Page 63]

incurred by a standard facility that cannot be recovered through the sale of its energy on the market, known as compensation for investments and an amount linked to operations, intended to cover any difference between a standard facility's operating costs and the revenue generated from its participation in the energy production market, known as compensation for operations.”

“The compensation for investments and compensation for operations applicable to a standard facility are to be calculated based on standard revenues from the sale of energy valued at market rates, standard operating costs required to perform the activity and the standard value of the initial investment - all three standard values established on the basis of an efficient, well-managed company. ”

“The compensation for investments and, where applicable, the compensation for operations - aims to cover the higher costs incurred by facilities that produce electricity from renewable energy ..., so that they may compete on an equal footing with other technologies and obtain a reasonable return by reference to the standard facility applicable in each case. ”

“Moreover, the concept of “reasonable return” on a project is introduced into the regulatory framework. In line with legal scholarship on this matter in recent years, reasonable return is set as a pre-tax return approximately equal to the average yield on ten-year government bonds in the secondary market for the 24-month period leading up to the month of May of the year prior to the commencement of a given regulatory period, increased by a spread.”

“Regulatory periods are to have a six-year duration. The first regulatory period spans from the date of entry into force of Royal Decree-Act 9/2013, of 12th July, to 31st December 2019. Each regulatory period is divided into two half-periods of three years each; the first half-period runs from the date of entry into force of Royal Decree 9/2013, 12th July, to 31st December 2016.”

“The compensation benchmarks may be adjusted as part of a review conducted at the end of each regulatory half-period or period, pursuant to Article 14.1 of Act 24/2013, of 26th December."

“All compensation benchmarks may be adjusted in the corresponding review, including the value upon which reasonable return is to be based over the remaining regulatory life of standard facilities”

“Once a facility's regulatory useful life has elapsed, it will no longer receive the compensation for investments or compensation for operations. Such facilities may remain in operation, receiving only the remuneration earned on energy sales on the market. " [Emphasis added]

262. Under RD 413/2014, the most significant compensation benchmarks needed to calculate the Specific Remuneration framework included (i) compensation for investments; (ii) compensation for operations; (iii) investment incentive to reduce generation costs; (iv) useful regulatory life; (v) minimum number of operating hours; (vi) operating threshold; (vii) maximum number of operating hours for the receipt of compensation for operations,

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where applicable; (viii) annual upper and lower market price limits; and (ix) average annual daily and intraday market price. ¹⁷³

263. RD 413/2014 provided that the most significant criteria necessary to calculate compensation benchmarks should include, but not be limited to, (i) standard value of the initial investment in the standard facility; (ii) estimate of the daily and intraday market price; (iii) number of operating hours of the standard facility; (iv) estimate of future revenue resulting from participation in the generation market; (v) other defined operating costs; (vi) estimate of future operating costs; (vii) re-adjustment rate based on reasonable return; (viii) adjustment coefficient of the standard facility; (ix) net asset value.

264. Under RD 413/2014, the compensation benchmarks might be adjusted as part of a review conducted at the end of each regulatory half-period (3 years) or period (6 years) pursuant to EPA 2013. All compensation benchmarks might be adjusted in the corresponding review, including the value upon which reasonable return is to be based over the remaining regulatory life of standard facilities.

265. Under RD 413/2014, for CSP facilities, the electricity produced from other fuels would not be included in the calculation of the remuneration.

266. With respect to “reasonable return”, Article 19(1) of RD 413/2014 stated that:

"The value upon which the reasonable return of standard facilities is based shall be calculated as the average yield on ten-year government bonds in the secondary market for the 24-month period leading up to the month of May of the year prior to the commencement of a given regulatory period, increased by a spread. Review of the value upon which reasonable return is based shall apply to the standard facility's remaining regulatory useful life. ”¹⁷⁴

267. RD 413/2014 offered a special treatment of existing facilities that were already in receipt of the feed-in-tariff when RD-L 9/2013 came into force. Those existing facilities were entitled to benefit from the Specific Remuneration framework introduced under RD 413/2014, but for those facilities “pre-tax reasonable return shall be based on the average yield on ten-year government bonds in secondary markets over the ten years prior to the

¹⁷³ Ibid., Article 13(2). ↩
¹⁷⁴ Ibid., Article 19(1). ↩

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entry into force” of RD-L 9/2013, increased by a spread of 300 basis points, without prejudice to any of the reviews foreseen for each regulatory period. ¹⁷⁵

Ministerial Order IET/1045/2014

268. On June 16, 2014, the Ministerial Order IET/1045/2014 (“MO IET/1045/2014") was approved. ¹⁷⁶ It entered into force on June 21, 2014. ¹⁷⁷ Based on the mandate given by RD 413/2014, it defined in further detail the remunerative parameters applicable to the standard facilities under the Specific Remuneration regime of EPA 2013.¹⁷⁸

269. Under Annex III, MO IET/1045/2014 established 7.398% as the “reasonable return" value for renewable energy producers. This value would apply until the end of the first regulatory period (July 12, 2013 - December 31, 2019) and would be subject to discretionary reviews for subsequent regulatory periods. ¹⁷⁹

270. Article 5(1) of MO IET/1045/2014 provided that the regulatory useful life for the CSP facilities was 25 years. ¹⁸⁰ Article 5(2) provided that the standard amount of initial investment for each of the standard facilities allocated to the facilities falling within the scope of this order should be set forth in Annex VIII.

Ministerial Order IET/1168/2014

271. On July 3, 2014, Ministerial Order IET/1168/2014 (“MO IET/1168/2014”) was approved. It determined the date of automatic registration of certain facilities on the Specific Remuneration regime register regulated in Title V of RD 413/2014.¹⁸¹

¹⁷⁵ Ibid., Second Additional Provision. ↩
¹⁷⁶ Ministerial Order IET/1045/2014, of June 16, 2014. (C-0383) (R-0229). ↩
¹⁷⁷ The final provision stated that this order should be effective as of the following date of its publication in the "Official State Gazette". (R-0229EN), p. 46454. The order was published on the official State Gazette (BOE) on June 20, 2014. ↩
¹⁷⁸ (R-0229EN), MO IET/1045/2014, Article 1(1). ↩
¹⁷⁹ Ibid., Annex III, 1.3. 300 basis points above the average yield of 4.398% on Spanish ten-year government bonds. ↩
¹⁸⁰ Ibid., Article 5 (1). ↩
¹⁸¹ Ministerial Order IET/1168/2014, of July 3, 2014. (C-0391t) ↩

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Ministerial Order IET/1882/2014

272. On October 14, 2014, Ministerial Order IET/1882/2014 (“MO IET/1882/2014") was approved. It determined the calculation methodology for the electric energy generated from the usage of fuels in thermosolar facilities. ¹⁸² Pursuant to Law 15/2012, such electricity produced using back-up fuels would not be entitled to the special payment regime applicable to solar thermal facilities. MO IET/1882/2014 provided that any payments received as premiums or tariffs for electricity produced by using back-up fuels from January 1, 2013, the date of entry into force of Law 15/2012, would have to be returned.

Ministerial Order ETU/130/2017

273. On February 17, 2017, Ministerial Order ETU/130/2017 was approved. It updated the remuneration parameters for the standard facilities applicable to certain electric power production facilities based on renewable energy sources, cogeneration and waste, for the purpose of their application to the regulatory half-period beginning January 1, 2017.¹⁸³

Decision of the European Commission rendered on November 11, 2017

274. The European Commission rendered a decision on November 11, 2017, regarding the Support for Electricity generation from renewable energy sources, cogeneration and waste (State Aid S.A. 40348 (2015/NN)) (the “EC’s State Aid Decision”). ¹⁸⁴ In this decision, the European Commission assessed whether existing installations received overcompensation for their entire life under the new remuneration scheme Spain notified to the European Commission, and found that on the basis of the total payments received under both schemes (the specific remuneration scheme and the premium economic scheme), that was not the case. The European Commission observed that as Spain had decided to replace the premium economic scheme with the notified aid measure, it was not relevant for the scope

¹⁸² Ministerial Order IET/1882/2014, of October 14, 2014. (C-0376t) ↩
¹⁸³ (W-0493SP/W-0493ENG) ↩
¹⁸⁴ Decision of the European Commission, rendered on November 11, 2017, regarding the Support for Electricity generation from renewable energy sources, cogeneration and waste (State Aid S.A. 40348 (2015/NN). (RL- 0091ENG) ↩

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of that decision to assess whether the originally foreseen payments under the previous schemes would have been compatible or not. ¹⁸⁵

275. The EC's State Aid Decision included a general comment which reads that:

“As a general comment, the Commission recalls that there is ‘no right to State aid'. A Member State may always decide not to grant an aid, or to put an end to an aid scheme. Where the aid has not been authorized by the Commission, the Member State is obliged to suspend the scheme until the Commission has declared it compatible with the internal market pursuant to Article 108(3) TFEU. "¹⁸⁶

276. With respect to the investors' legitimate expectations arguments submitted to European Commission as well as before investor-State arbitration, the European Commission expressed its view as follows:

“The investors argue, both before investor-State arbitration tribunals and in their submissions to the Commission, that by modifying the support scheme with regard to existing installations, Spain has violated the general principles of Union law of legal certainty and legitimate expectations. "¹⁸⁷

“In the very specific situation of the present case, where a Member State grants State aid to investors, without respecting the notification and stand-still obligation of Article I 08(3) TFEU, legitimate expectations with regard to those State aid payments are excluded. That is because according to the case-law of the Court of Justice, a recipient of State aid cannot, in principle, have legitimate expectations in the lawfulness of aid that has not been notified to the Commission. ”¹⁸⁸

D. THE CLAIMANT'S INVESTMENTS

277. In this section, the factual background of the Claimant's investment in the Solacor Plants in Spain will be reviewed. While this section is based upon the Parties' respective chronology and the evidence on the record of the proceedings, it does not purport to be exhaustive of all the matters of fact upon which the Parties have placed reliance in advancing their respective positions in the course of these proceedings. The Tribunal has nonetheless considered all the facts and evidence produced by the Parties in these proceedings. The Tribunal considers that it would be helpful to set out certain salient facts

¹⁸⁵ (RL-0091ENG), para 156. ↩
¹⁸⁶ Ibid., para 155. ↩
¹⁸⁷ Ibid., para 157. ↩
¹⁸⁸ Ibid., para 158. ↩

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or events relating to the Claimant's investment in chronological order which are relevant to the Tribunal's analysis of the merits of the Claimant's claims later in this Decision.

278. The Claimant is one of Japan's biggest global engineering companies and specializes in the design and construction of large energy infrastructure projects around the world. Traditionally, JGC's business has been strongly focused on the hydrocarbons sector.¹⁸⁹

279. In 2010 the Claimant invested in two of the Spanish special purpose vehicle companies which own and operate CSP plants in Andalusia, Spain. The Claimant acquired 26% interests each in Solacor Electricidad Uno, S.A. which owns Solacor 1 plant, and Solacor Electricidad Dos, S.A. which owns Solacor 2 plant (Solacor Electricidad Uno, S.A and Solacor Electricidad Dos, S.A. will collectively referred to as “Solacor SPVs”. The Solacor 1 and Solacor 2 plants, as previously indicated, will be collectively referred to as the “Solacor Plants” or “Solacor Projects”, as appropriate). As of the closure of this arbitral proceedings, the Claimant has 13% interests each in Solacor SPVs.

280. During a conference on energy-related matters held in Abu Dhabi (UAE) in January 2009, the Claimant learned about projected CSP installations of Abengoa Solar (“Abengoa Solar") in southern Spain. Thereafter, JGC contacted the Economic and Trade Office of the Spanish Embassy in Tokyo, which arranged JGC representatives' visit to Spain.¹⁹⁰

281. In mid-March 2009, members of JGC's Project Investment & Market Development (Global Marketing) department visited Abengoa Solar in Seville to get to know first-hand its CSP technology.¹⁹¹ In this trip, the JGC delegation visited Madrid to meet with the officials of the Spanish administrative agencies such as Invest in Spain and IDAE. They met Ms. Manuela Garcia, Service Manager for Investors of Invest in Spain¹⁹² who carried out a presentation for JGC, and Ms. Amparo Fresneda and Mr. Carlos Montoya, both of IDAE.¹⁹³ Subsequent to the meeting, Mr. Shibuya of JGC and Ms. Manuela García of Invest

¹⁸⁹ CWS-ME1, para. 16. ↩
¹⁹⁰ Cl. Mem., para. 529 and footnote 584 of Cl. Mem.; CWS-ME1 para 42-44. ↩
¹⁹¹ CWS-ES, para. 23. ↩
¹⁹² JGC understood that Invest in Spain was an administrative unit of the Spanish Government in charge of promoting foreign investment in Spain. See CWS-ME1, footnote 5. ↩
¹⁹³ JGC understood that IDAE was an administrative agency dependent on the Spanish Government focused on improving energy efficiency, renewable energies and other low-carbon technologies. See CWS-ME_t, footnote 6. ↩

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in Spain exchanged several communications during the ensuing months with regard to the Spanish regulatory framework governing CSP plants.¹⁹⁴

282. Favourably impressed by its delegation's trip to Spain, the Claimant initiated discussions with Abengoa Solar. Abengoa Solar submitted an investment proposal to JGC in April 2009 with details of projected CSP installations and information on the feed-in incentives of the Special Regime. Abengoa Solar proposed to JGC to co-invest in plants in two alternative locations in Andalusia or Extremadura.¹⁹⁵

283. Specifically, in a PowerPoint presentation dated April 2009, Abengoa Solar presented to the Claimant the permit status of the plants in Andalusia and stated that the Andalusia plants were granted status as a "Special Regime Generator (rights to feed-in-tariff)".¹⁹⁶ Abengoa Solar proposed that Abengoa Solar and JGC be the owners of the projects, with Abengoa Solar retaining a majority, and JGC helping the project companies to get bank financing from Japanese institutions.¹⁹⁷

284. This presentation included project details proposed by Abengoa Solar, outlining the key goals in terms of deal structure, roles of the parties and necessary timing for internal approvals (including due diligence needs) as well as a high-level description of the financing role that Japanese banks could play and their requirements. It stated that Abengoa Solar would expect to receive an expression of interest from JGC.¹⁹⁸ This presentation also included a statement that Abengoa Solar's CSP plants would receive “a subsidy (feed in tariff), being the incomes according to one of the two options under the Special Regime of RD 661/2007".¹⁹⁹

285. On April 21, 2009, JGC submitted an Expression of Interest (“EOI”) to Abengoa Solar.²⁰⁰

¹⁹⁴ Cl. Mem., para. 530; CWS-ME_t, para. 44. ↩
¹⁹⁵ PowerPoint presentation made by Abengoa Solar to JGC titled as “Investment case to JGC, April 2009”. (C-0332) ↩
¹⁹⁶ Ibid., Slide 29. ↩
¹⁹⁷ Ibid., Slide 33. ↩
¹⁹⁸ Ibid., Slides 34 and 35. ↩
¹⁹⁹ Ibid., Slide 37. ↩
²⁰⁰ Yamazaki's email to Eduard Soler, dated April 21, 2009 enclosing a letter from Endo of JGC to Soler of Abengoa Solar, dated April 21, 2009, titled “Expression of Interest on Concentrating Solar Power Project in Spain". (C-0334) ↩

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286. Thereafter, JGC began an internal due diligence process and initiated discussions with Sumitomo Mitsui Banking Corporation (“SMBC”) and Hong Kong Shanghai Banking Corporation ("HSBC”) to arrange for a project finance scheme for the Solacor Project.²⁰¹

287. The Claimant also agreed with Abengoa Solar to arrange overseas institutional insurances of Nippon Export and Investment Insurance (“NEXI”), the Japanese State-owned export credit agency, which issues overseas institutional guarantees for the banks (Overseas United Loan Insurance, “OULI”) to provide the banks with greater comfort in securing the financing.²⁰²

288. On May 27, 2009, JGC and Abengoa Solar signed a Memorandum of Understanding (“MOU”).²⁰³ This MOU set forth the parties' agreement in principle in relation to the first actions to be taken for the implementation and subsequent exploitation of the Solacor Project they intended to collaborate. The exclusivity period of this MOU was 30 days.

289. In its preamble, the MOU identified, as the project to be covered by the MOU, two 50MW solar thermal power plants in Cordoba, Andalucia, in a very advanced stage of permission, owned by two special purpose companies, which were in turn owned 100% by Abengoa Solar through subsidiaries.

290. Key features of this MOU included the following:

(i) Subject to JGC securing the financing of the project acceptable to the parties, satisfactory due diligence of the project by JGC and the parties entering into a joint development agreement, JGC would become equity owner of the project by purchasing or subscribing the shares of the two SPVs.

(ii) JGC intended to invest a maximum amount of EUR 50 million and its target ownership in SPVs is a minimum of 25%, but would not exceed 49% of total shares outstanding of SPVs.

²⁰¹ Cl. Mem., para. 532. ↩
²⁰² Cl. Mem., para. 533. ↩
²⁰³ Memorandum of Understanding signed between JGC and Abengoa Solar of May 27, 2009. (C-0335) ↩

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(iii) If NEXI insurance was not obtained or financing was not secured in satisfactory conditions to both parties, both parties had the right to revisit, at mutual agreement, all objectives and scope of this agreement.

291. On June 2, 2009, Abengoa Solar made formal requests for registration of the Solacor 1 and Solacor 2 Plants in the Remuneration Pre-Assignment Registry within the time limit set by RD-L 6/2009.²⁰⁴

292. In June 2009, Mr. Shibuya of JGC held a meeting with Ms. Garcia, Services Manager of Invest in Spain, in Madrid to discuss the regulatory framework applicable to CSP installations. Ms. Garcia made a presentation on the legal framework to Mr. Shibuya and later sent her presentation file (translated into Japanese) to Mr. Shibuya in her email dated June 18, 2009.²⁰⁵

293. The presentation was titled as “Legal Structure”. On the cover page, Ms. Garcia was described as Service Manager for Investors of Invest in Spain. At the bottom of the cover page had two logos, “Gobierno de España Ministerio de Industria, Turismo y Comercio" and “INVEST IN SPAIN”.²⁰⁶

294. This presentation included the following explanation of the remuneration regime for CSP plants under the heading of RD 661/2007:

(i) "This law²⁰⁷ aims to secure sufficient profits commensurate with investment by means of enabling the industry to set a mid-term and long-term target, establishing stability of this sector gradually, and attracting considerable interest in investment and aid in this industry"

²⁰⁴ CWS-ES, para. 34; (C-0139) and (C-0140) ↩
²⁰⁵ Cl. Mem., paras. 534 and 535; CWS-ME1, para. 60 -62; (C-0093t) ↩
²⁰⁶ (C-0093) and (C-0093t); Invest in Spain, presentation to JGC, June 18, 2009 (C-0092) and (C-0092t). The file attached to Ms. Garcia's email of June 18, 2009 was in Japanese (C-0093), translated from an English version (C-0092t) used in her meeting with Mr. Shibuya in Madrid. CWS-ME1, para. 62. ↩
²⁰⁷ There appears some confusion in referring to RD 661/2007 in (C-0092t). In the English translation (C-0092t), RD 661/2007 was referred to as Royal Decree Law 661/2007 in a few places where the Japanese version from Ms. Garcia referred Royal Decree to Royal Decree Law in Japanese (政令法) as compared to Royal Decree ((政令). ↩

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(ii) “Furthermore, this Royal Decree Law is intended to contribute to achieving the target set in 'Renewable Energy Plan 2005-2010' and the target set by the Spanish provincial governments. By means of development of these technologies, it is anticipated that renewable energies will amount to 12% of all domestic energy consumption in Spain in 2010 and the amount of CO2 emissions will be reduced by 27 million tons in the same year."

(iii) "It is planned that the fixed tariff and the premium will be revised in 2010. This revision is in accordance with a new target set in a new ‘renewable energy plan' towards the next term 2011-2020, provided that the target set in the ‘Renewable Energy Plan 2005-2010' and 'Policy of Saving and Efficiency of Energy' is achieved."

(iv) “Any revision in the feed-in tariff thereafter will not apply to the plants already in operation. This is the commitment to the stability and development of this sector which is to be a legal backup for generators."

(v) "The new regulation guarantees to hydroelectric and wind power plants 7% average profit rate when the generated electric power is supplied to electric power suppliers and 5-9% profit rate when it enters into the electric power generation market. For the other power generation technologies, because development of biomass, biogas, or solar thermal power whose development is limited, special subsidies are provided. The profit rate amounts to 8% when electric power is supplied to electric power suppliers and 7-11% when it enters into the electric power generation market."

(vi) "The fixed tariff, the premium and the maximum and the minimum will be renewed by the standard of RPI minus 0.25 until 2012 and RPI minus 0.50 thereafter like any other subsidies.” [Emphasis added]

295. The same presentation included, among others, the following statements under the heading of Royal Decree Law 6/2009, referring to Article 4(1) (Mechanism involving Feed-in Tariff Pre-registration for the plants operating under the special regime):

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(i) "An application for registration of the Feed In Tariff Pre-registration shall be a necessary condition to be entitled to the economic regime established in Royal Decree 661/2007, of May 25.”

(ii) "Plants registered on the Feed In Tariff Pre-registration registry shall have a maximum period of thirty-six months from the date of notification of an official registration on the registry of power generation plants of the competent authorities under the special regime to its proceedings and the start of the sale of energy. If this is not complied, a right to the economic subsidies as a result of their official registration based on the registration on the Feed In Tariff Pre-registration registry shall be revoked."

296. In June, 2009, JGC prepared a presentation for discussion at an internal committee within JGC titled “The equity investment in the 100MW Concentrated Solar Power Project in Spain".²⁰⁸ It outlined JGC's planned investment in the Solacor Project, and included a slide describing the tariff regime in Spain. Under the heading of “Favorable Tariff Regime in Spain", it stated that the feed-in tariff was guaranteed by the Spanish government for a certain period of time, and described the specific amount per/kWh applicable to FiT and FiP options for the first 25 years and thereafter. It also mentioned an inflation adjustment connected to Consumer Price Index in Spain.²⁰⁹

297. On June 28, 2009, the Claimant and Abengoa Solar agreed to extend the exclusivity period of the MOU for sixty days.²¹⁰

298. On July 30, 2009, JGC entered into a Joint Development Agreement (“JDA”) with Abengoa Solar to develop the Solacor Project.²¹¹ The JDA elaborated the contents of the MOU in further details. Under the JDA, JGC was willing to become a 25% to 49%

²⁰⁸ CWS-ME1, para 63; JGC's preliminary assessment for the Solacor Project, discussed within the Investment Team's internal committee, June 2009. (C-0548t). ↩
²⁰⁹ (C-0548t), slide 5. ↩
²¹⁰ The Tribunal notes that the Claimant's chronological list of main facts states that the date of extension was July 6, 2009. The Complementary Agreement is dated as of June 28, 2009. The email from Mr. Soler of Abengoa Solar to Mr. Yamazaki of JGC is dated July 6, 2009. (C-0516) ↩
²¹¹ Cl. Mem., para. 542; Joint Development Agreement (“JDA”) signed between JGC and Abengoa Solar of July 30, 2009. (C-0338) ↩

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shareholder of two Solacor SPVs and the Solacor Project was planned to be implemented under Spanish feed-in tariff regime pursuant to RD 661/2007.²¹²

299. In the recital of the JDA, it was stated that Abengoa Solar had filed an application of pre- registration under RD-L 6/2009 on June 4, 2009, in order to secure the Special Regime for the Solacor Plants. Under the JDA, JGC's becoming an equity owner of Solacor SPVs was subject to four explicit conditions such as (i) successful completion of due diligence by JGC, (ii) successful definitive closing of financing in conditions and amount acceptable to both parties, (iii) reaching an agreement on key contracts related to the projects, mainly Shareholders Agreement, EPC Contract and O&M Contract and (iv) successful registration of the Solacor Project under RD-L 6/2009.²¹³ The parties agreed that Abengoa Solar would lead the development of the Solacor Plants and that JGC would take responsibility of arranging the financing for the project and securing the participation of NEXI by providing its OULI policies over the senior loans.²¹⁴

300. The JDA also provided that "[w]hen AS and JGC agree that the terms and conditions of senior loan reach those acceptable to both Parties, the Parties shall execute the Shareholder Agreement" and "[t]he execution of the Shareholders Agreement means the Parties' commitment of the equity funding pursuant to the provisions of the Shareholders Agreement.”²¹⁵ The deadline for the execution of the Shareholders Agreement under the JDA was November 30, 2009.

301. On August 24, 2009, Clifford Chance issued to the lenders a draft “Report on the Economic Regime Applicable to Solar Thermal Plants” (“Clifford Chance Report").²¹⁶ The Claimant reviewed this report and shared it with NEXI.²¹⁷ In view of the importance attached by the Respondent in its defence to the Clifford Chance Report²¹⁸, core contents of this report are described in detail in the following paragraphs.

²¹² JDA, Clause 1.1. (C-338) ↩
²¹³ Ibid., Clause 2.1. ↩
²¹⁴ Cl. Mem., para. 543. ↩
²¹⁵ JDA, Clause 3. (C-0338) ↩
²¹⁶ Clifford Chance draft report, dated as of August 24, 2009. (C-0574) ↩
²¹⁷ Cl. Reply para. 323. ↩
²¹⁸ For instance, Resp. Rej., paras. 925-943. ↩

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302. The Clifford Chance Report stated that European legislation directly affected the national legal framework applicable to Special Regime installations and noted that the European Parliament and the Council had approved Directive 2009/28/EC, dated April 23, 2009, on the promotion of the use of energy from renewable sources. It also noted that Directive 2009/28/EC set forth specific national overall targets for the share of energy from renewable sources in gross final consumption in energy in 2020, the target set out for Spain being 20 per cent.²¹⁹

303. With respect to the possibility of modifying the economic regime established in RD 661/2007 affecting solar thermal plants included within its scope, the Clifford Chance Report stated that:

"On different occasions the Spanish Supreme Court has established that the economic regime applicable to special regime electric energy production installations can be modified affecting installations included under the previous regime."

“...the Administration may, in exercise of its reglamentary (sic) authority (that is, the authority to approve rules which are inferior in rank to laws), modify the economic conditions applicable to special regime facilities as long as such modification respects the principles set out in the Spanish Constitution and the legal imperatives established within the Spanish legal system”.²²⁰

304. The Clifford Chance Report further opined that:

“However, there are certain limits to any such modification. In this sense, the disposition modifying the economic regime established in RD 661/2007 affecting solar thermal plants included within its scope cannot be restrictive of individual rights, thus the degree of retroactivity of the disposition would have to be analysed in order to ensure that it does not do so, as per the prohibition of retroactive restrictions on individual rights established in article 9.3 of the Constitution, in accordance with the below. Equally, said disposition cannot infringe the principle of legal certainty, which is intimately related to the principle of legitimate expectations. Lastly, said disposition has to respect the limitations imposed by Law 54/1997, in particular the provisions contained in article 30 of said Law. "²²¹

²¹⁹ (C-0574), pp.1-2. ↩
²²⁰ (C-0574), pp. 21-22. The Clifford Chance Report cites the ruling of the Spanish Supreme Court dated October 10, 2007 [RJ 2007/7050]. ↩
²²¹ Ibid., p. 22. The Clifford Chance Report cites the Ruling of the Supreme Court dated December 15, 2005 [RJ 2006/246]. ↩

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305. The Clifford Chance Report concluded that²²²:

“1. It is possible for a reglamentary (sic) disposition to modify the economic regime established in RD 661/2007 affecting solar thermal plants included in its scope.

2. However, in order for said disposition to be valid, it must respect the following:

a) It cannot retroactively affect the payment of tariffs or premiums corresponding to energy that has already been sold by the owner of a special regime production facility.

b) It cannot infringe the principles of legal certainty and legitimate expectations, taking into account the following:

- The importance of the modification introduced.

- The predictability of the modification.

- The existence of exterior signs by the Administration creating the belief that a reglamentary change will not take place.

- The existence of sufficient transitory measures or compensatory measures.

c) It has to ensure that the special regime electric energy installations receive reasonable rates of return with regard to the investment costs incurred as established in Law 54/1997."

306. With respect to the principle of legal certainty and legitimate expectations mentioned above, the Clifford Chance Report explained that the principle of the protection of legitimate expectations had been recognized as a legal principle of the European legal system by the jurisprudence of the Court of Justice of the European Communities and by the jurisprudence of the Spanish Supreme Court. It further stated that this principle was established in Article 3.1. of Law 30/1992, which imposed the obligation to respect the principles of bona fide and legitimate expectations in their actions on the Spanish Public Administration and that the aim of this principle was “to protect legitimate expectations, and more specifically, those situations worthy of protection due to a violation of the confidence placed in the actions of the public authorities, which determined a specific conduct from the people receiving said action.”²²³

²²² Ibid., pp. 28-29. ↩
²²³ Ibid., pp. 24-25. ↩

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307. According to the Clifford Chance Report, in order to determine the validity of a possible disposition modifying the economic regime established in RD 661/2007 affecting solar thermal plants included in its scope with regard to the limit mentioned in this section (that is, the limit of the respect of the principles of legal certainty and legitimate expectations), it was necessary to analyse the elements which characterised the violation of said principles. It identified four criteria with the aim of determining which situations would cause an infringement of the principle of legitimate expectations, as set forth in 2.b) of the paragraph 305 above.

308. With respect to the “The predictability of the modification” criterion mentioned above, the Clifford Chance Report opined that the principle of legitimate expectations was more likely to be deemed infringed when the modification had been brought about suddenly, with few or no indications as to the possibility of said modification taking place. It continued to state that with regard to the predictability of a new rule reducing the current tariffs and premiums received by solar thermal plants in operation, it would seem this was quite a real possibility, taking into account especially the short period of time between the entry into force of RD 436/2004 and that of RD 661/2007. It cited the decision of the Spanish Supreme Court, dated October 25, 2006 [RJ 2006/8824] which affirmed that “the companies that, of their own accord, decide to establish themselves within a market such as that of special regime electricity generation, are or should be aware of the fact that these can be modified, within the legal limits, by the relevant authorities”.²²⁴

309. With respect to the “existence of exterior signs by the Administration creating the belief that a reglementary change will not take place" criterion mentioned above, the Clifford Chance Report opined that:

“In the case at hand, said belief could be founded on the fact that the Spanish Government, by means of the provisions contained in articles 36 and 44.3 of RD 661/2007, has established a series of tariffs, premiums and supplements to be received during the whole useful life of solar thermal plants for the sale of the electricity they generate. Additionally, notwithstanding the prevision of future reviews of said tariffs, premiums, supplements and upper and lower limits in view of the results of the reports monitoring the compliance with the Renewable Energies Plan (PER) 2005-2010, the Energy Efficiency and Saving Strategy in

²²⁴ Ibid., pp. 25-26. ↩

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Spain (E4) and of those new objectives included in the next Renewable Energies Plan for the period 2011-2020, article 44.3 of RD 661/2007 expressly states that the reviews of the regulated tariff and the upper and lower limits on the aggregate of the reference market price and the reference premium will not affect those installations that have entered into service prior to 1 January of the second year after the year during which the review has taken place. ”²²⁵

310. On November 13 and 15, 2009, Mr. Shibuya of JGC sent an email inquiry to Mr. Altozano of Lovells, JGC's legal counsel at the time, seeking an advice on certain aspects of the official press release issued by the Ministry of Industry, Tourism and Commerce on November 13, 2009 titled as “Approval of Schedule for New Wind and Thermosolar Facilities for the Next Three Years”.²²⁶ On November 16, 2009, Lovells responded to Mr. Shibuya by email as follows:

“1. All projects already registered in the pre-assignation registry (i.e. 2440 MW) shall be entitled to feed-in tariff as per RD 661/2007.

2. Those projects shall be commissioned as per the calendar established in the agreement of the Council of Ministers. This means that, for instance, if a project has been registered pursuant to Transitory Provision 4 of RDL 6/2009 it shall be entitled to feed-in tariff although it shall start sale of electricity in the annual period established in teh [sic] calendar.

3. The 36 months period to complete the relevant plant shall is extended in accordance with the relevant year of planned commission for that relevant plant. "²²⁷

311. In November 2009, Pöyry Energy Consulting issued "Spanish Solar Update" report to Abengoa Solar.²²⁸

312. On November 25, 2009, an amendment agreement to the JDA was made between JGC and Abengoa Solar extending the deadline for the execution of the Shareholders Agreement until March 30, 2010.²²⁹

313. On December 2, 2009, Mr. Altozano of Lovells issued a Memorandum on the Official Commissioning Certificate and Right to the Feed-in Tariff, addressed to Mr. Yamazaki and

²²⁵ Ibid., p. 26. ↩
²²⁶ (C-0339). ↩
²²⁷ Id. ↩
²²⁸ "Spanish Solar Update” issued by Pöyry Energy Consulting to Abengoa Solar in November 2009. (C-0623) ↩
²²⁹ (C-0521) The amendment agreement was dated as of November 25, 2009. ↩

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Mr. Ishii of JGC.²³⁰ This memorandum was in response to JGC's inquiry regarding the application for final registration of the Solacor Plants in the RAIPRE and application of feed-in tariff, and starting of commercial operation of the Solacor Plants.

314. On December 11, 2009, the Ministry of Industry, Tourism and Commerce issued a resolution titled “Resolution from the General Directorate for Energy Policy and Mining including the SOLACOR 1 facility in the remuneration pre-allocation Register, property of SOLACOR ELECTRICIDAD UNO, SA, which is granted the economic regime regulated in Royal Decree 661/2007, May 25" in the name of Antonio Hernández García, General Manager.²³¹ This resolution resolved that Solacor 1 was registered in the Remunerations Pre-assignment Register, and identified Solacor 1 as Phase 2 as defined in the Resolution of the Council of Ministers dated November 13, 2009. It stated that the maximum deadline of thirty-six months referred to in RD-L 6/2009 should start to count from the date of notice of this resolution.

315. On the same date, the Ministry of Industry, Tourism and Commerce issued the same resolution for Solacor 2 with the same wording as the Solacor 1 plant.²³²

316. Soon after the Solacor Plants were registered in the Remuneration Pre-assignment Register, SMBC and HSBC reached an agreement with Mizuho Corporate Bank Netherland N.V., ("Mizuho") and BNP Paribas (Tokyo Branch) (“BNP”) (together, the “Lenders”) to constitute a banking syndicate that would guarantee sufficient financing to construct the Solacor Plants.²³³

317. Subsequent to the Solacor Plants' registration on the Remuneration Pre-assignment Register, NEXI started an internal due diligence process for the issuance of its OULI policies. In February 2010, NEXI’s representatives made a business trip to Madrid and Seville. The purpose of the NEXI's business trip was to determine whether the Special

²³⁰ Memorandum on the Official Commissioning Certificate and Right to the Feed-in tariff issued by Lovells on December 2, 2009. (C-0568) ↩
²³¹ Registration of Solacor 1 in the Remuneration Pre-allocation Register, December 11, 2009. (C-0141) (C-0141t) ↩
²³² Registration of Solacor 2 in the Remuneration Pre-allocation Register, December 11, 2009. (C-0142) ↩
²³³ Cl. Mem., para. 550. ↩

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Regime incentives would remain stable throughout the project life. NEXI representatives met with officers of CNE, IDAE and BBVA, a major Spanish Bank.²³⁴

318. NEXI's internal business report stated that the purposes of visit was to interview the Spanish authority in charge of designing and operating the feed-in tariff system (IDAE and CNE) and the market participants on the identification of source of fund for the feed-in tariff and possibility of the reduction of the fixed tariff given in the FIT system.

319. Stating that “whether FIT remains stable throughout the project life and whether the fixed tariff applicable to the projects remain as originally decided are critical elements in deciding whether to underwrite insurance because it will enhance credit in a project finance scheme", the NEXI report included NEXI representatives' understanding of the feed-in tariff regime in Spain in the following words:

“The current system is based on the Royal Decree (“RD”) 661/2007 established in 2007 and RD6/2009 which provides the revised procedure for solar thermal projects."

“PV and solar thermal developers one after another have entered into the business and the electricity generating capacity of the renewable energies has been increasing more rapidly than the government of Spain expected because the stable revenue is secured by the long-term off-take guarantee at the fixed price. The government of Spain significantly reduced the fixed tariff and the premium for the PV projects in order to secure the system stability. For the solar thermal technology, it decided to revise the registry system and give constraints of the number of the applicable projects and the timing of commencing application. As a consequence, only the projects which were enumerated on the list published in December 2009 were eligible to receive the current fixed tariff. "²³⁵

320. The report included the debriefing of the interviews conducted by NEXI representatives in their visit to Spain as follows:

“The FIT is effective to expand the installation of the renewable energies. We think the stable operation of the system is feasible. (IDAE)”

“The FIT promotes investor's participation into projects by designing the system which enables long-term anticipated earnings (guarantee on the fixed tariff during

²³⁴ Cl. Mem., paras. 553 and 554; (C-0340) (C-0340t) Report of Business Trip. ↩
²³⁵ NEXI's agenda and report of JGC and NEXI's business trip to the Plants' site, February 22, 2010, pp. 2-3. (C-340t) ↩

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plan operation period and no retroactive application of regulatory change. (CNE)”

“Although we cannot entirely deny a possibility that the fixed tariff will be reduced by any future regulatory change, such reduction if any is applied to new projects only and will not affect to the projects which are already entitled to receive the tariff before such reduction. (CNE)”

“We provide loans on the premise that once a project is entitled to a fixed tariff such fixed tariff will not be affected by any future regulatory change (not retroactively). (BBVA)”

“On top, as mentioned in 2) above, regulatory measures have been already adopted to reduce “over burden on the public” which was the biggest problem of the FIT system. Therefore, the system is sufficiently reliable in terms of the price stabilities for the existing projects and stabilities of future projects (#). (IDAE, CNE, [Redacted])”

“There was large deficit in the cash flow of the electricity generators in 2008 in Spain. It was mainly due to the fact that the large capacity of the PV, which was entitled to the higher tariff compared with other renewable energies, was installed. When it takes into account that the tariff for the solar thermal technology is relatively low, the probability of the occurrence of the same phenomena happened in 2008 is low by introduction of concentrated solar power. (IDAE) "²³⁶

321. In the meantime, the Claimant and Abengoa Solar were negotiating the EPC and O&M contracts for the construction of the Solacor Plants and began drafting a share purchase agreement, whereby JGC would acquire 26% stakes in each of two Solacor SPVs.²³⁷

322. On February 18, 2010, Pöyry Energy Consulting issued "Answers to Solacor Questionnaire: A note from Pöyry Energy Consulting to Solacor".²³⁸ This report included Pöyry's answer to Solacor's specific questions related to the remuneration regime for CSP projects and the potential impact of the tariff deficit thereon. In response to a question asking the consultant's “view on how Spanish legislation is attractive for investors, which contribute to the increase of CSP project”, the answer included, among others, the following statements:

“Government long term commitments with renewables are clear.”

²³⁶ Ibid., pp. 3-5. ↩
²³⁷ Cl. Mem., para. 559. ↩
²³⁸ "Answers to Solacor Questionnaire” issued by Pöyry Energy Consulting to Solacor on February 18, 2010. (C-0624) ↩

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“Political commitment to respect and more importantly not harm investors. This has been done in many occasions in which legal changes have being [sic] introduced but also introducing mitigating measures in order to diminish the potential impact.”

[...]

“The main driver behind the level of success of this industry is the level of remuneration which coupled with good natural conditions (solar radiation and availability of Land) make CSP market extremely attractive in Spain. "²³⁹

323. In response to another question which reads “[p]lease include the detailed explanation on the source of premium. We concern that hike of end user tariff (last resort tariff) for compensate the increase of premium may become political agenda and, then lead to have negative impact on stability of curre [sic]", Pöyry's answers included, among others, the following statements:

“In line with the calendar set out in RDL 6/2009 and the pre-assigned register approved, the government has the obligation to gradually raise the TPA to cover the required subsidies. In this regard there is a clear intention from the government to do it. However, we believe this might be under stress if certain conditions occur (i.e., demand and oil prices to rise coupled with low hydro generation will press prices upwards generating pressure on end user tariffs). The government might want to reduce the level of support as they did for wind in 2007. The issue here is that changes have not been retrospective and have provided mechanisms (i.e., transitory periods, or the option to remain under the prior scheme under the regulated option) to cause small impact on investors IRR and over the ability of projects to repay debt.

If a project is under the market option, changes have been introduced in a way that allow projects to remain under the previous regime (indefinitely if choosing the regulated option or during a transitory period if staying under the market option). This was the case of the wind industry in 2007.

Moreover in case of Solar PV the change introduced through RD 1578 to reduce the previous tariff by 30% did apply for new projects, thus those PV projects already built before RD 1578 still have the right to the old tariff (substantially higher).

This situation has been consistent over time when looking at the behaviour of the Spanish Government and we think it will keep the same way for legal reasons.”²⁴⁰

²³⁹ Ibid., Answer to Question 2. ↩
²⁴⁰ Ibid., Answer to Question 3. ↩

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324. In response to a question asking an explanation on the tariff deficit in relation to the increase of CSP project, Pöyry responded that:

“Consequently there was an impact from renewable subsidies increasing the tariff deficit in the past, and as long as regulated prices which do not reflect all system costs exist the deficit will go on. The government however has tackled this issue through RDL 6/2009 by allowing TPAs to rise in a controlled manner. "²⁴¹

325. On March 25, 2010, the JDA was extended again until May 31, 2010.²⁴²

326. On April 19, 2010 Lovells issued a “Legal Due Diligence Report” for the Claimant.²⁴³ It was marked as draft as at April 19, 2010. The report, addressed to JGC Corporation, stated that this report was prepared for use in connection with the proposed acquisition by JGC of a minority stake in the share capital of SPVs holding all rights and interests in the Solacor Plants. Lovells report confirmed that the Solacor Plants had been registered in the Pre- assignation Register pursuant to RD-L 6/2009 and, therefore, qualify for the feed in tariff of RD 661/2007.²⁴⁴

327. In May 2010, JGC learnt from Abengoa Solar that the Respondent was holding negotiations with Protermosolar with regard to potential changes to the regulatory framework applicable to CSP plants. Thereafter, JGC and Abengoa Solar held regular communications to discuss and update on the status of the negotiations.²⁴⁵

328. On May 26, 2010, Mr. Soler Babot of Abengoa Solar travelled to Tokyo and met with representatives of JGC and NEXI and discussed the negotiations between the Respondent and Protermosolar. NEXI was reassured about the positive outcome of the on-going negotiations.²⁴⁶

329. On June 7, 2010, JGC's Board of Directors approved a resolution authorizing the signature of an agreement for JGC to acquire 7,826 shares each out of the 30,100 issued shares in each of Solacor SPV, with the purchase price of EUR 15,652 each, representing 26% of

²⁴¹ Ibid., Answer to Question 4. ↩
²⁴² Email from Mr. Eduardo Soler Babot to Mr. Yusuke Yamazaki of March 29, 2010. (C-0523) ↩
²⁴³ Legal Due Diligence Report issued by Lovells on April 19, 2010. (C-0567) ↩
²⁴⁴ Ibid., Section 2, p. 14 and Section 2.4, pp, 16-17. ↩
²⁴⁵ Cl. Mem., para. 560; CWS-ME1, paras. 82-84. ↩
²⁴⁶ Cl. Mem., para. 562; CWS-ME1, para. 85; Yamazaki's email to Mr. Soler dated May 20, 2010. (C-0342) ↩

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the shares in two Solacor SPVs.²⁴⁷ In this board meeting, the management of JGC explained to the board members that JGC intended to invest in CSP projects having a total capacity of 100MW (50MWx2) to be constructed by Abengoa at Cordoba, Andalusia, Spain and sought an approval to acquire 26% of the shares in Solacor SPVs with put and call options. The management further explained that the resolutions for participation in the transaction should be finally put on the agenda of the board after detailed conditions of the financing were determined. The agenda presented to the board of directors of the JGC also included a statement that if the financial closing was not consummated by the end of September 15, 2010, there was a special condition to the effect that JGC should have the right to sell the said shares at the same price to the seller. The outline of the project stated that with respect to tariff, “Spanish laws and regulations on the Feed-in-Tariff shall apply."

330. On June 22, 2010, JGC and Abengoa Solar S.A. and other Abengoa subsidiaries entered into a Sale and Purchase Agreement of Shares whereby JGC acquired from Abengoa Solar 7,826 shares of each Solacor SPV with a face value of two Euros per share, representing 26% equity interests in each of them.²⁴⁸ This agreement included a right of put and call option if the "Financial Close” as defined in the agreement did not occur on or before August 2, 2010 (with a possibility of extension until September 15, 2010 if NEXI and the Lenders had given internal approval to proceeding with the “Financial Close” on or before August 2, 2010).²⁴⁹

331. On the same day (June 22, 2010), representatives of JGC and Abengoa Solar held a meeting with the Lenders to update them on the status of the negotiations between the Respondent and Protermosolar. According to the Claimant, during this meeting, Mr. Seage of Abengoa Solar communicated to JGC and the Lenders that “Protermosolar and the Spanish Government were about to reach an “Agreement” (probably within the following days), under which both parties (Spain and the CSP industry represented by Protermosolar) would commit to certain essential points.”²⁵⁰

²⁴⁷ Cl. Mem., para. 563; Extract of JGC's Board Resolutions of June 7, 2010. (C-0343) (C-0343t) ↩
²⁴⁸ Cl. Mem., para. 564, (C-0344) ↩
²⁴⁹ Article 6 (CSI Purchase of Shares) of the Agreement. (C-0344) ↩
²⁵⁰ CWS-ME1 paras. 94-95; Cl. Mem. para. 567; CWS-ES, para. 55. ↩

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332. On June 26, 2010, Altermia Asesores Tecnicos S.L. (“Altermia”) issued the final drafts of “Technical assessment of a 50 MW solar thermal project "Solacor 1" at El Carpio (Córdoba)”²⁵¹ and “Technical assessment of a 50 MW solar thermal project "Solacor 2" at El Carpio (Córdoba)”.²⁵² These draft assessments were in response to Abengoa Solar's request to perform an independent technical due diligence of the Solacor Project. The reports focused on the technical risk related to the project and technology.

333. On July 1, 2010, Mr. Seage sent an email to Mr. Yamazaki and Mr. Endo of JGC attaching a Spanish version of the draft of the Respondent's agreement with the solar thermal sector together with an informal English translation.²⁵³

334. On July 2, 2010, the Respondent publicly announced by means of an official press release that it had reached an agreement with the CSP subsector.²⁵⁴ Abengoa Solar received this press release directly from the Ministry as soon as it was made public.²⁵⁵

335. On July 3, 2010, Mr. Soler Babot of Abengoa Solar sent an email to Mr. Endo and Mr. Yamazaki of JGC informing that the Spanish Government had announced that an agreement with the wind and CSP sectors had been reached on July 2, 2010. In this email, he stated that while not all details were announced, it was “sufficient to know that there is no impact in the tariff or the premium (except for 1 year on the premium as you know).”²⁵⁶

336. On July 4, 2010, Mr. Soler Babot sent an email to Mr. Yamazaki of JGC attaching the official press release of the Ministry of July 2, 2010. He stated that:

“It is high level, but the highlighted paragraph clearly says that tariff and premiums of the RD 661/2007 will be applied to all plants in operation and in the pre-registry (Do not worry for the reference to 2013 in that paragraph, the only change before that is that we will not be able to sell at pool+premium during the first year of operations). ”²⁵⁷

²⁵¹ (C-0625) ↩
²⁵² (C-0626) ↩
²⁵³ (C-0217t); CWS-ES, para. 57. ↩
²⁵⁴ (C-0040/C-0040t) Official Press Release issued by the Ministry of Industry, Tourism and Commerce on July 2, 2010. ↩
²⁵⁵ CWS-ES, para. 58; (C-0214), an email from Mr. Seage to Mr. Soler Babot forwarding an email from Crescente De Antonio of the Ministry to Mr. Seage. ↩
²⁵⁶ (C-0215) ↩
²⁵⁷ (C-0345) ↩

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337. On July 7, 2010, Lovells sent an email to Mr. Yamazaki and Mr. Ishii of JGC attaching "the wording (in Spanish) of the recent agreement reached between the thermosolar industry and the Spanish Ministry of Industry”.²⁵⁸ Lovells outlined the “main features of the understanding between the Industry and the Ministry” in this email. One of such features was the “amendment of art.44 RD 661/2007 so that any future revision of the FIT or premiums shall not affect existing plants or projects registered in the pre-assignation registry prior to the date of the relevant revision or those plants finally registered in the RAIPRE prior to 6 May 2009.”

338. On July 28, 2010, JGC's Board of Directors adopted a resolution approving the investment in the Solacor Project.²⁵⁹ The management sought an approval of the Board that JGC invest in the project by acquiring 26% interest in each of the two Solacor SPVs with the total project costs of around EUR 570 million. The conditions presented to the Board for its approval included (i) financing by senior lenders composed of SMBC, HSBC, Mizuho and BNP, subject to the overseas untied loan insurance by NEXI; (ii) financial closing date expected to be in August 2010; (iii) commercial operation commencement date expected to be in March 2012; and (iv) expected internal rate of return (IRR) of around 10%. The Outline of the Project stated that with respect to Tariff, “Spanish laws and regulations on the Feed-in-Tariff shall apply.”

339. On July 30, 2010, in response to Abengoa Solar's request on behalf of JGC for a comfort letter specifically addressed to NEXI, Mr. Antonio Hernandez Garcia, General Director for Energy Policy & Mining of the Ministry of Industry, Tourism and Commerce, wrote a letter addressed to the Chairman of the Board of NEXI on the official letterhead of the Ministry.²⁶⁰ Abengoa Solar forwarded this letter to JGC in order for JGC to share the document with NEXI.²⁶¹ This letter, written in English, reads as follows:

“We issue this letter at the request of Abengoa Solar to confirm to the Board of Directors of the Nippon Export and Investment Insurance (NEXI) that we

²⁵⁸ (C-0573) ↩
²⁵⁹ Extract of JGC's Board Resolution of July 28, 2010. (C-0346/C-0346t) ↩
²⁶⁰ (C-0261) ↩
²⁶¹ Cl. Mem. para 579; e-mail on August 1, 2010 from Mr. Eduard Soler Babot to Mr. Yusuke Yamazaki (Mr. Endo and Mr. Ikeda Kazuki were copied) of August 1, 2010 (C-0348); exchange of emails on August 5, 2010 between Mr. Eduard Soler Babot and Mr. Yusuke Yamazaki. (C-0349) ↩

[Page 87]

are initiating today the procedure for the approval of the revised regulation for Concentrating Solar Power technology in Spain. This new Royal Decree includes the results of the meetings maintained with the sector for the last weeks."

340. On August 5, 2010, NEXI's Board Committee agreed to start naidaku (informal consent in Japanese) proceedings to issue its OULI policies. NEXI approved the transaction without any particular conditions.

341. On the same day, NEXI sent an email to SMBC informing that its “Board's conclusion today was that it is acceptable for the “naidaku” procedures to proceed. Hereafter, the "naidaku" document will be issued after the insurance reapplication, etc.” This email was copied to JGC's representatives who in turn communicated this information to Abengoa Solar on the same day.²⁶²

342. On August 6, 2010, the financial closing of the project was conducted. The following agreements were signed by Solacor Electricidad Uno S.A., Solacor Electricidad Dos S.A., the Lenders and other parties, as appropriate²⁶³:

(i) Senior Credit Facility Agreement between SMBC (as Agent and NEXI Agent), Sumitomo Mitsui Finance Dublin Limited, HSBC Tokyo Branch, Mizuho Corporate Bank Netherland N.V., and BNP Paribas Tokyo Branch (as Lenders) and Solacor Electricidad Uno, S.A. as Borrower, dated as of August 6, 2010.²⁶⁴

(ii) Senior Credit Facility Agreement between SMBC (as Agent and NEXI Agent), Sumitomo Mitsui Finance Dublin Limited, HSBC Tokyo Branch, Mizuho Corporate Bank Netherland N.V., and BNP Paribas Tokyo Branch (as Lenders) and Solacor Electricidad Dos S.A. as Borrower, dated as of August 6, 2010.²⁶⁵

²⁶² (C-349t), (C-0350) ↩
²⁶³ Cl. Mem., para. 582. ↩
²⁶⁴ (C-0560) ↩
²⁶⁵ (C-0559) Senior Credit Facility Agreements ((C-0560) and (C-0559)) will be collectively referred to as “Loan Agreements". ↩

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(iii) Shareholders Agreement signed by CSI, Abengoa Solar, JGC and Solacor Electricidad Uno, S.A. dated as of August 6, 2010.²⁶⁶

(iv) Shareholders Agreement signed by CSI, Abengoa Solar, JGC and Solacor Electricidad Dos, S. A. dated as of August 6, 2010.²⁶⁷

(v) Construction Contract among Solacor Electricidad Uno, S.A., Carpio Solar Inversiones, S.A., JGC Corporation, Abener Energía S.A. y Teyma, Gestión de Contratos de Construcción e Ingeniería, S.A., Unión Temporal de Empresas, Ley 18/1982, Solacor El Carpio I and Abengoa S.A., dated as of August 6, 2010.²⁶⁸

(vi) Construction Contract among Solacor Electricidad Dos, S.A., Carpio Solar Inversiones, S.A., JGC Corporation, Abener Energía S.A. y Teyma, Gestión de Contratos de Construcción e Ingeniería, S.A., Unión Temporal de Empresas, Ley 18/1982, Solacor El Carpio II and Abengoa S.A., dated as of August 6, 2010.²⁶⁹

(vii) Operation and Maintenance Agreement for Solacor 1 signed between Abengoa Solar España, S.A. and Solacor Electricidad Uno, S.A.²⁷⁰; and

(viii) Operation and Maintenance Agreement for Solacor 2 signed between Abengoa Solar España, S.A. and Solacor Electricidad Dos, S.A.²⁷¹

343. On August 27, 2010, NEXI issued “naidaku” document (informal consent document) addressed to SMBC to enter into the insurance agreement regarding the OULI for Solarcor Project.²⁷²

²⁶⁶ (C-0557) ↩
²⁶⁷ (C-0558) Shareholders Agreements ((C-0557) and (C-0558)) will be collectively referred to as “Shareholders Agreements". ↩
²⁶⁸ (C-0601) ↩
²⁶⁹ (C-0602) Construction Contracts ((C-0601) and (C-0602)) will be collectively referred to as “EPC Contracts”. ↩
²⁷⁰ (C-0603) ↩
²⁷¹ (C-0604) Operation and Maintenance Agreements ((C-0603) and (C-0604)) will be collectively referred to "O&M Contracts". ↩
²⁷² NEXI's naidaku to issue the OULI policy to Solacor 1, of August 27, 2010 (C-0555) and NEXI's naidaku to issue the OULI policy to Solacor 2, of August 27, 2010. (C-0556). ↩

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344. On September 7 and October 14, 2010, JGC subscribed to the corresponding capital increases of Solacor SPVs to maintain a 26% stake therein.²⁷³ By these two subscriptions to capital increases, JGC became the owner of 425,919 shares of Solacor SPV 1, representing in total 26% of the share capital of Solacor SPV 1²⁷⁴ and 430,963 shares of Solacor SPV 2, representing in total 26% of the share capital of Solacor SPV 2.²⁷⁵

345. On December 1, 2010, each of the Solacor SPVs sent a letter to the Director-General for Energy Policy and Mining communicating its “Waiver letter of entry into operation on a specific date" "pursuant to the Resolution of the General Directorate of Energy Policy and Mining dated 12/11/2009", and requesting “a Resolution communicating the remuneration conditions for the operational life of the facility”.²⁷⁶

346. On March 1, 2011, in response to the December 1, 2010 letters, Mr. Antonio Hernández García, the Director-General for Energy Policy and Mining issued an acceptance letter to each of Solacor SPVs.²⁷⁷ The contents of these two letters are exactly the same except for the identity of the addressee and the project name.

347. The acceptance letter addressed to Solacor SPV 1 included, among others, the following statements:

“According to the provisions of section 1 of the fifth transitional provision of such Royal Decree-Law, the remuneration regime applicable to the facilities registered on the Remuneration Pre-allocation Register under the provisions of the fourth transitional provision of such Royal Decree-Law, will be the regime provided by Royal Decree 661/2007, of September 26.”

“Accordingly, this General Directorate, under the powers conferred by the prevailing legislation, and considering that the request for registration on the Remuneration Pre-allocation Register was timely and duly filed by the owner SOLACOR ELECTRICIDAD UNO, S.A., sufficiently demonstrated the compliance with the requirements applicable to the technology it employs, as regulated in Article 4.3 of Royal Decree-Law 6/2009, of April 30, which adopts certain

²⁷³ Cl. Mem., para. 586. ↩
²⁷⁴ Whereas IV of Share Purchase Agreement between Carpio Solar Inversiones, S.A. as Purchaser, JGC Corporation as Seller and Abengoa, S.A. as Guarantor, dated June 30, 2015. (C-0026) ↩
²⁷⁵ Whereas IV of Share Purchase Agreement between Carpio Solar Inversiones, S.A. as Purchaser, JGC Corporation as Seller and Abengoa, S.A. as Guarantor, dated June 30, 2015. (C-0027) ↩
²⁷⁶ (C-0294/C-0294t); (C-0296/C-0296t) ↩
²⁷⁷ (C-0295/C-0295t); (C-0297/C-0297t) ↩

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measures in the energy sector and passes the discount tariff, resolved to register the following project or facility on the Remuneration Pre-allocation Register: "

"...this Directorate ... [c]ommunicates that, at present, under the provisions of paragraph 1 of the fifth transitional provision of Royal Decree-Law 6/2009, of April 30, the remuneration applicable to the facility is made up of the tariffs, premiums, upper and lower limits and supplements established by RD 661/2007, of May 25, and updated annually by Order of the Minister of Industry, Tourism and Commerce, with the current values from January 1, 2011 being as follows: [Emphasis added]

Reference value of the supplement for reactive energy by application of the bonus or penalty percentages: 8.4681 €0.01/kWh.

348. On January 19, 2012, the Final Registration on the RAIPRE of Solacor 1 was done and the Commissioning Certificate was issued as of the same date.²⁷⁸

349. On February 21, 2012, the Final Registration on the RAIPRE of Solacor 2 was done and the Commissioning Certificate was issued as of the same date.²⁷⁹

350. On February 23, 2012, Mr. Satoru Satoh, Japanese Ambassador to Spain met with Minister José Manuel Soria López (Minister of Industry, Energy and Tourism of the Respondent), and subsequently sent him a follow up letter, dated March 13, 2012, to convey “concern that certain measures which the Spanish Government may adopt in order to reduce the deficit of the electricity tariff will have a retroactive effect on thermosolar plants”.²⁸⁰ In this letter, referring that the recommendations of the CNE report dated March 9, 2012 included retroactive measures affecting the renewable energy sector, Ambassador Satoh stated that

²⁷⁸ (C-0088/C-0088t) ↩
²⁷⁹ (C-0089/C-0089t) ↩
²⁸⁰ (C-0368/C-0386t) ↩

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“I strongly hope that these retroactive measures are not implemented and that legal certainty and the confidence of investors remain safeguarded."

351. On April 9, 2012, Minister José Manuel Soria López sent a reply letter to Ambassador Satoh.²⁸¹ In this letter, he stated that:

“the Government continues to maintain its commitment to renewable energies as part of our country's energy mix. Legal certainty is one of the basic pillars of any reform measure regarding the energy system in order for Spain to meet the 2020 binding targets.

...

The Government's action will be focused on the adoption of measures to correct current imbalances. Our priority is to reduce the tariff deficit of the electricity sector in order to set up a stable energy model for the coming years, ensuring legal certainty and regulatory stability for foreign investors.”

352. On April 30, 2012, CNE issued its first invoice for the energy produced by Solacor 1.²⁸²

353. On May 31, 2012, CNE issued its first invoice for the energy produced by Solacor 2.²⁸³

354. On June 18, 2012, Mr. Inagaki, the Vice Chairman of NEXI sent a letter to Mr. Fernando Martí Scharfhausen of the Ministry of Industry, Energy and Tourism, conveying NEXI’s concern “about the sustainability of the Feed-in Tariff regime, in particular for retroactive legal changes which will negatively affect the profitability of the solar thermal projects", and requesting thoughtful consideration in maintaining the legal sustainability of the pre- registered solar thermal projects.²⁸⁴

355. On July 5, 2012, Ambassador Satoh sent a letter to Minister Manuel Soria López (Minister of Energy) conveying a particular concern about the implementation of a tax on renewable energy generation based on production efficiency as a part of a possible new energy reform.²⁸⁵ He stated that “[a]ny new generation taxes or fees would entail significant reductions in their income, resulting in many cases in serious losses or even the shutdown

²⁸¹ (C-0370/0370t) ↩
²⁸² (C-0143/C-0143t) ↩
²⁸³ (C-0144/C-0144t) ↩
²⁸⁴ This letter was attached to an e-mail from Mari Yamamoto (NEXI) to Mr. Yusuke Yamazaki (JGC) of June 18, 2012. (C-0458/0458t) ↩
²⁸⁵ (C-0454/0454t) ↩

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of the projects. Furthermore, such drastic measures may cause the flight of foreign capital and harm Spain's image as an investment destination.”

356. On September 27, 2012, Mr. Endo of JGC had a meeting with Mr. Rafael Coloma of the Spanish Embassy in Japan and sent a letter to him the next day.²⁸⁶ In this letter²⁸⁷, stating that the new rule announced by the Ministry of Industry, Energy and Tourism on September 14, 2012 would have a critical impact on its CSP projects in Spain, JGC expressed its concern in the following words:

“The new rule would be a retroactive measure in the FIT regime (Royal Decree 661/2007) and is of a discriminatory nature affecting only CSP ...

The negative impact would be huge, reducing revenues by around 12% in addition to the 6% revenue tax.

CSP projects would be unable to obtain even a reasonable return under the prescribed Spanish Laws, and some would face difficulty in serving their debt.”

357. On September 28, 2012, Mr. Rafael Coloma (Economic and Commercial Counsellor, Spain's Embassy in Japan) sent an email to the Minister of Energy's Chief of Staff, titled as “New tax rule under consideration in Spain for power producers impact on JGC as investors in Solacor 1 and 2” attaching the JGC's letter of September 28, 2012.²⁸⁸

358. On October 3, 2012, Mr. Koichi Kawana, President and Representative Director of JGC sent a letter to Mrs. Soraya Sáenz de Santamaría, Vice-President of the Government of Spain conveying JGC's concern and requesting reconsideration of taking retroactive measures negatively impacting international and local investors.²⁸⁹

359. On October 4, 2012, Mr. Isetani of JGC, Director and Senior General Manager of JGC, sent a letter to the officials of the Government of Spain conveying JGC's concern and forwarding a copy of Mr Kawana's letter of October 12, 2012 referred to above to Deputy Prime Minster of Spain.²⁹⁰

²⁸⁶ (C-0450) ↩
²⁸⁷ (C-0449) ↩
²⁸⁸ (C-0451) ↩
²⁸⁹ (C-0452) ↩
²⁹⁰ (C-0453) ↩

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360. On October 4, 2012, Japan's Ministry of Economy, Trade and Industry sent a letter to Spain's Ministry of Energy expressing its concern and requesting “thoughtful consideration in maintaining legal sustainability".²⁹¹

361. On October 4, 2012, Messrs. Alan D. Solomont (Ambassador of the United States of America) and Satoru Satoh (Ambassador of Japan) jointly sent a letter to H.E. Mr. Mariano Rajoy Brey (President of the Government of the Kingdom of Spain) conveying concern over the retroactive legislative changes damaging Spain's overall investment climate by negatively affecting investor's confidence and requesting reconsideration.²⁹²

362. On March 20, 2013, JGC, ITOCHU Corporation, Mitsubishi Corporation and Mitsui & Co, Ltd. jointly sent a letter to Mr. José Manuel Soria López, Minister of Industry, Energy and Tourism of Spain.²⁹³

363. On March 21, 2013, JGC sent a letter, dated as of March 18, 2013, to the Prime Minister of Spain, Mariano Rajoy, to inform of the existence of the present dispute under the ECT and requested the commencement of a three-month negotiation (cooling-off) period in order to avoid resorting to international arbitration.²⁹⁴

364. On April 3, 2013, Mr. Grangel Vicente, chief of staff of the Secretary of State for Energy Matters of the Respondent, sent a letter in Spanish to counsel for the Claimant (Cuatrecasas)²⁹⁵. In this letter, he acknowledged receipt of the March 18, 2013 letter but requested the Claimant to comply with the provisions of Spanish administrative law by submitting a translation into Spanish of the said letter.

365. On April 12, 2013, the Claimant answered by means of a second letter²⁹⁶ which enclosed a Spanish translation of the March 21 and April 12, 2013 letters.

²⁹¹ (C-0455) ↩
²⁹² (C-0456) ↩
²⁹³ (C-0462) ↩
²⁹⁴ Cl. Mem., para 905; (C-09a). ↩
²⁹⁵ (C-0010) ↩
²⁹⁶ (C-0011) ↩

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366. During the three-month cooling-off period under the ECT, the Clamant and the Respondent had three meetings, on June 26 and 27 and July 17, but failed to resolve the dispute.²⁹⁷

367. On July 29, 2013, Mr. Toshimitsu Motegi, Minister of Economy, Trade and Industry of Japan sent a letter to the Deputy President of the Spanish Government, Ms. Soraya Sáenz de Santamaría Antón, the Minister of Economy and Competitiveness, Mr. Luis de Guindos Jurado, and the Minister of Energy, Mr. José Manuel Soria López.²⁹⁸ On September 9, 2013, H.E. Mr. José Manuel Soria López (Minister of Energy) sent a reply to Mr. Toshimitsu Motegi.²⁹⁹

368. On September 27, 2013, Ambassador Satoh sent a letter to Minister José Manuel García- Margallo Marfil, Minister of Foreign Affairs and Cooperation; Mr. Luis de Guindos Jurado, Minister of Economy and Competitiveness, and Mr. José Manuel Soria López, Minister of Energy.³⁰⁰

369. On January 17, 2014, another meeting took place between the Claimant and the Respondent which ended without any agreement on the dispute.³⁰¹

370. On August 22, 2014, the Claimant sent a letter to the Respondent about the new measures and requested a further negotiation for an amicable settlement of the dispute.³⁰²

371. On February 19, 2015, the final meeting took place between the Claimant and the Respondent without any resolution of the dispute.

372. On June 8, 2015, the Claimant submitted a Request for Arbitration to ICSID.

373. On June 30, 2015, the Claimant entered into two Share Purchase Agreements to sell each of its 13% equity interest in Solacor SPVs to Carpio Solar Inversiones, S.A. (“Carpio”), an Abengoa Solar group company.³⁰³ Each agreement provided that subsequent to the

²⁹⁷ Cl. Mem., para 908. ↩
²⁹⁸ (C-0466) ↩
²⁹⁹ (C-0467) ↩
³⁰⁰ (C-0468) ↩
³⁰¹ Cl. Mem., para 909. ↩
³⁰² (C-0012a)., Cl. Mem., para. 914. ↩
³⁰³ (C-0026); (C-0027) ↩

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transfer of title to the shares sold under the agreement, Carpio owned 87% of the Company's share capital and JGC continued to own the remaining 13% of the Company's share capital. The closing of those sales of shares took place on January 7, 2016.³⁰⁴

374. The prices for the sold shares were EUR 8,447.946 for Solacor 1 SPV shares, and EUR 8,548,826 for Solacor 2 SPV shares, each with a certain additional adjustment amount to be calculated under the Share Purchase Agreement.³⁰⁵

375. Article 2.3 of each Share Purchase Agreement provides for JGC's rights under international law as follows:

“For the avoidance of doubt, the Seller's rights under international law (in connection with the ECT Claim and any other related claims) that shall have accrued prior to the Closing shall remain with the Seller and not be affected by the Closing."

IV. THE PARTIES' RELIEF SOUGHT

A. THE CLAIMANT'S REQUEST FOR RELIEF

376. The Claimant included the following Petitum and reservation of rights in its Memorial on the Merits:

“1427. For the foregoing reasons, the Claimant hereby respectfully requests that the Arbitral Tribunal issues an Award as follows:

DECLARING that the Respondent's actions and omissions with respect to the Claimant's Investment in the CSP subsector in Spain amount to breaches of the Respondent's obligations under Part III of the Energy Charter Treaty and MFN treatment, as well under the applicable rules and principles of international law;

ORDERING the Respondent to pay to the Claimant compensation in the amount of EUR 93.5 million free of/from taxes and of/from any type of withholding or equivalent; compensation which may be increased;

ORDERING the Respondent to pay the entire costs of the arbitration and all legal costs incurred by the Claimant;

ORDERING the Respondent to pay to the Claimant pre- and post-award interest accrued on all amounts claimed, compounded, until full payment thereof; and,

³⁰⁴ Cl., Reply, para. 559; CWS-TM2, para. 34. ↩
³⁰⁵ Article 3.1 of (C-0026) and (C-0027). ↩

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ORDERING any such further relief as the Arbitral Tribunal may deem appropriate.

1428. The Claimant hereby reserves its right to make further submissions on fact and/or law, to respond to any allegations or defenses put forward by the Respondent, to provide and request any evidence that it deems appropriate and to amend and/or supplement the relief sought in this arbitration.”

377. The Claimant included the following Petitum and reservation of rights in its Reply on the Merits and Counter-Memorial on Jurisdiction:

“711. For the foregoing reasons, JGC hereby respectfully requests that the Arbitral Tribunal issues an Award as follows:

DECLARING that the Arbitral Tribunal has jurisdiction to hear all claims submitted by JGC under the Energy Charter Treaty and, consequently, rejecting the preliminary objections that the Respondent raised against the jurisdiction of the Arbitral Tribunal;

DECLARING that the Respondent's actions and omissions with respect to JGC in the CSP subsector in Spain amount to breaches of the Respondent's obligations under Part III of the Energy Charter Treaty, as well as under the applicable rules and principles of international law;

ORDERING the Respondent to pay JGC compensation in the amount of EUR 105.2 million (amount calculated as of September 30, 2017 as a temporary proxy to the date of award and including interests until January 31, 2018, and being an amount that may be increased to provide full compensation); or alternatively, in the amount of EUR 161 million (amount based on the alternative but-for calculation by Compass Lexecon as of September 30, 2017 as a temporary proxy to the date of award and including interests until January 31, 2018, and being an amount that may be increased to provide full compensation);

ORDERING the Respondent to pay the entire costs of the arbitration and all legal costs and other expenses incurred by JGC;

ORERING the Respondent to pay to JGC (a) pre-award interest at a rate equal to the cost of equity at the relevant valuation date (4.99% assessed as of September 30, 2017, the proxy to the date of award) and (b) post- award interest at a rate equal to the cost of equity at the relevant valuation date (4.99% assessed as of September 30, 2017, the proxy to the date of award) plus an additional 2%; interest accrued on all amounts claimed, com- pounded, until full payment thereof

DECLARING that the Arbitral Tribunal's Award is made net of all taxes and/or withholdings, and ORDERING the Respondent to indemnify JGC for any taxliability or withholding that may be imposed in Spain or Japan, in relation to the compensation awarded in the Tribunal's Award; and

ORDERING any such other and further relief as the Arbitral Tribunal may deem appropriate.

712. JGC hereby reserves their rights to make further submissions on fact and/or law, to respond to any new allegations or defenses that the Respondent may put

[Page 97]

forward, as well as to provide and request any evidence that they deem appropriate and, accordingly, to amend and/or supplement the relief sought in this arbitration."

378. The Claimant included the following Petitum and reservation of rights in its Rejoinder on Jurisdiction:

“125. For the foregoing reasons, JGC hereby respectfully requests that the Arbitral Tribunal issues an Award as follows:

DECLARING that the Arbitral Tribunal has jurisdiction to hear all claims submitted by the Claimant under the Energy Charter Treaty and, consequently, REJECTING each of the preliminary objections that the Respondent raised against the jurisdiction of the Arbitral Tribunal in its Counter-Memorial on the Merits and Memorial on Jurisdiction of December 2, 2016 and kept or introduced in its Rejoinder on the Merits and Reply on Jurisdiction of April 20, 2018;

DECLARING that the Respondent's actions and omissions with respect to JGC in the CSP subsector in Spain amount to breaches of the Respondent's obligations under Part III of the Energy Charter Treaty, as well as under the applicable rules and principles of international law;

ORDERING Respondent to pay to JGC compensation in the amount of EUR 105.2 million (amount calculated as of September 30, 2017 as a temporary proxy to the date of award and including interests until January 31, 2018, and being an amount that may be increased to provide full compensation); or alternatively, in the amount of EUR 161 million (amount based on the alternative but-for calculation by Compass Lexecon as of September 30, 2017 as a temporary proxy to the date of award and including interests until January 31, 2018, and being an amount that may be increased to provide full compensation);

ORDERING the Respondent to pay the entire costs of the arbitration and all legal costs and other expenses incurred by JGC;

ORDERING the Respondent to pay to JGC (a) pre-award interest at a rate equal to the cost of equity at the relevant valuation date (4.99% assessed as of September 30, 2017, the proxy to the date of award) and (b) post-award interest at a rate equal to the cost of equity at the relevant valuation date (4.99% assessed as of September 30, 2017, the proxy to the date of award) plus an additional 2%; interest accrued on all amounts claimed, compounded, until full payment thereof;

DECLARING that the Arbitral Tribunal's Award is made net of all taxes and/or withholdings, and ORDERING the Respondent to indemnify JGC for any tax liability or withholding that may be imposed in Spain or Japan, in relation to the compensation awarded in the Tribunal's Award; and,

ORDERING any such other and further relief as the Arbitral Tribunal may deem appropriate.

126. JGC hereby reserves its rights to make further submissions on fact and/or law, to respond to any new allegations or defenses that the Respondent may put forward, as well as to provide and request any evidence that it deems appropriate

[Page 98]

and, accordingly, to amend and/or supplement the relief sought in this arbitration."

379. The Claimant included a similar Petitum and reservation of rights in paragraphs 176 and 177 of its Post-Hearing Brief.

B. THE RESPONDENT'S REQUEST FOR RELIEF

380. The Respondent included the following Petitum and reservation of rights in its Counter- Memorial on the Merits and Memorial on Jurisdiction:

“1616. In view of the arguments set forth in this Document, the Kingdom of Spain respectfully requests the Arbitral Tribunal to:

Declare that there is no jurisdiction to recognise the Claimant's claims in relation to the TVPEE, in accordance with what is stated in section III of this Counter- Memorial.

Dismiss all the claims of the Claimant regarding the other contested measures, since the Kingdom of Spain has not in any way failed to comply with the ECT, in accordance with what is stated in section IV of this Counter-Memorial.

Furthermore, all claims for compensation of the Claimant should be dismissed as they are not entitled to compensation in accordance with Section V of this Counter- Memorial;

Sentence the Claimant to pay all the costs and expenses arising from this arbitration, including administrative expenses incurred by CIADI and the fees of the Court's Arbitrators, as well as the fees of the legal representation of the Kingdom of Spain, its experts and advisers, as well as any other costs or expenses that may have incurred. These costs and expenses must also incur a reasonable interest rate from the date these costs are incurred until the date of their actual payment.

1617. The Kingdom of Spain reserves the right to supplement, modify or add to these claims and to present any additional arguments required under the ICSID Convention, the ICSID Arbitration Rules, the Procedural Orders and the Arbitral Tribunal's directives in order to respond to all claims made by the Claimant in connection with the present case."

381. The Respondent included the following Petitum and reservation of rights in its Rejoinder on the Merits and Reply on Jurisdiction:

“2074. In view of the arguments put forward in this Memorial, the Kingdom of Spain respectfully requests the Arbitral Tribunal that:

It declares its lack of jurisdiction to hear the claims of the Claimant, or where appropriate, the inadmissibility, in accordance with what is stated in section III of this Memorial in reference to Jurisdictional Objections;

[Page 99]

Secondarily in the event that the Arbitration Tribunal were to decide that it has jurisdiction to hear the present dispute, that it rejects all the claims of the Claimant on the merits, since the Kingdom of Spain has not in any way breached the ECT, in accordance with what is set forth in sections IV and V of the present Memorial, regarding the Facts and the Merits of the Matter, respectively.

Secondarily, that it dismisses all of the Claimant's compensatory claims, as the Claimant has no right to compensation, pursuant to that stated in section VI herein; and

To Order the Claimant to pay all costs and expenses derived from this arbitration, including ICSID administrative expenses, arbitrators' fees, and the fees of the legal representatives of the Kingdom of Spain, their experts and advisors, as well as any other cost or expense that has been incurred, all of this including a reasonable rate of interest from the date on which these costs are incurred and the date of their actual payment.

2075. The Kingdom of Spain reserves the right to supplement, modify or complement these pleadings and present any and all additional arguments that may be necessary in accordance with the ICSID Rules of Arbitration, procedural orders and the directives of the Arbitral Tribunal in order to respond to all allegations made by the Claimant in regards to this matter."

382. The Respondent included the following Petitum and reservation of rights in its Post- Hearing Brief:

“126. In view of the arguments put forward in its Memorials and the present Skeleton Brief, the Kingdom of Spain respectfully requests the Arbitral Tribunal that:

It declares its lack of jurisdiction to hear the claims of the Claimant, or where appropriate, [their] the inadmissibility, in accordance with what is stated in section II of this Respondent's Skeleton in reference to Jurisdictional Objections;

Secondarily in the event that the Arbitration Tribunal were to decide that it has jurisdiction to hear the present dispute, that it rejects all the claims of the Claimant on the merits, since the Kingdom of Spain has not in any way breached the ECT, in accordance with what is set forth in sections III of the present Brief, regarding the Facts and the Merits of the case.

Secondarily, that it dismisses all of the Claimant's compensatory claims, as the Claimant has no right to compensation, pursuant to that stated in section III.E herein; and

To Order the Claimant to pay all costs and expenses derived from this arbitration, including ICSID administrative expenses, arbitrators' fees, and the fees of the legal representatives of the Kingdom of Spain, their experts and advisors, as well as any other cost or expense that has been incurred, all of this including a reasonable rate of interest from the date on which these costs are incurred and the date of their actual payment.

127. The Kingdom of Spain reserves the right to supplement, modify or complement these pleadings and present any and all additional arguments that

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may be necessary in accordance with the ICSID Rules of Arbitration, procedural orders and the directives of the Arbitral Tribunal.”

V. JURISDICTION

A. OVERVIEW

383. The Respondent initially raised two objections to jurisdiction of the Tribunal:

a. Complete lack of jurisdiction of the Tribunal to hear the dispute put forward by the Claimant claiming that EU law and principles are international law applicable to the ruling on this dispute for the purpose of Article 26(6) of the ECT and EU law prevents this dispute from being submitted to arbitration (the “EU law Jurisdictional Objection” or the “Achmea Objection”),³⁰⁶

b. Lack of jurisdiction of the Tribunal to hear an alleged breach by the Respondent of the obligations under Article 10(1) of the ECT, i.e., the FET, MCPS, Non- Impairment and Umbrella Clause protection standards, through the introduction of the TVPEE by Law 15/2012 since the Kingdom of Spain did not consent to submit this issue to arbitration, claiming that pursuant to Article 21 of the ECT, said standards are not applicable to the TVPEE neither by virtue of Articles 10(1) nor 10(7) of the ECT³⁰⁷.

384. The Respondent notes that its first objection is of a complete nature, and if upheld, it would entail the exclusion of the entire dispute from the jurisdiction of the Tribunal, whereas the second one is of a partial nature related to the TVPEE, and, if upheld, would only affect the dispute concerning the TVPEE.³⁰⁸

385. In its Post-Hearing Brief, the Respondent indicated in regard to the Achmea Objection that "[f]or reasons of consistency and loyal cooperation with the EU which are binding obligations on the Kingdom of Spain as a Member State, this Jurisdictional Objection is

³⁰⁶ The Respondent submitted this objection with its Rejoinder on the Merits and Reply on Jurisdiction dated April 20, 2018. ("Resp. Rej."). ↩
³⁰⁷ Resp. C-Mem., pp. 26-54. ↩
³⁰⁸ Resp. Rej., para. 7. ↩

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maintained insofar as the CJEU [the Court of Justice of the European Union] does not reach a different conclusion in its Opinion 1/2017 regarding the “CETA” agreement with Canada, still pending at the date of submission of this Post-Hearing Brief” (the “Opinion 1/2017").³⁰⁹

386. Noting that in the Opinion 1/2017, the CJEU indicated that “the principle of mutual trust, with respect to, inter alia, compliance with the right to an effective remedy before an independent tribunal, is not applicable in relations between the Union and a non-Member State", on November 8, 2019, the Respondent informed the Tribunal of its decision to withdraw its Achmea Objection to the jurisdiction of the Tribunal based on EU law.³¹⁰

387. Having confirmed that the Claimant had no objection, the Tribunal took note of the Respondent's withdrawal of the EU law Jurisdictional Objection in its PO. No. 8 issued on December 4, 2019. The Tribunal also took note that the Respondent maintained its jurisdictional objection relating to the TVPEE.

388. With respect to the jurisdictional objection relating to the TVPEE, the Respondent submits that the provisions relating to the TVPEE of Law 15/2012, passed by its Parliament (Congress of Deputies and Senate), are considered a “taxation measure” for the purposes of the ECT in accordance with Article 21(7)(a)(i) of the ECT. Pursuant to Article 21(1) of the ECT, Article 10(1) of the ECT does not give rise to obligations with respect to taxation measures of the Contracting Parties, and accordingly the Respondent has not given consent to submit the disputes relating to the TVPEE to arbitration. The Respondent submits that it only provided its consent to submit to investment arbitration disputes related to alleged breaches of obligations derived from Part III of the ECT (Article 26 of the ECT).³¹¹

389. The Claimant claims that the protection standards set forth in Article 10(1) of the ECT (namely, FET, MCPS, Non-impairment and Umbrella Clause) allegedly generate obligations of the Respondent with regard to the TVPEE by virtue of Article 10(1) of the ECT itself, or subsidiarily, by virtue of the MFN treatment obligation set forth in Article

³⁰⁹ Resp. PHB, para. 6. ↩
³¹⁰ The Respondent's November 8, 2019 letter (“Withdrawal”), para. 2 and footnote 2. ↩
³¹¹ Resp. C-Mem., paras. 66-69 and 174-176. ↩

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10(7) of the ECT. Specifically, the Claimant contends that the tax carve-out in Article 21(1) of the ECT cannot apply to the TVPEE, because it only applies to bona fide taxation measures and the TVPEE is not a bona fide taxation measure; even if the TVPEE was a bona fide taxation measure under Article 21(1) of the ECT, it would be a tax “other than those on income or on capital”. Accordingly, the Claimant submits that the Tribunal has jurisdiction by virtue of the claw-back in Article 21(3) of the ECT.³¹²

390. The Respondent rebuts that the FET, MCPS, Non-impairment and Umbrella Clause standards in Article 10(1) of the ECT are not applicable to the TVPEE by virtue of the MFN treatment obligation in Article 10(7) of the ECT either, given that such section does not apply to taxes on income and that the TVPEE is a tax on income.³¹³

391. Given the respective submissions of the Parties, the Tribunal considers that the jurisdictional objection of the Respondent relating to the TVPEE hinges upon the following two questions: (i) whether the TVPEE is a “Tax Measure of the Contracting Parties” for the purpose of Article 21(1) of the ECT which carves out “Tax Measures” from the ambit of the ECT; and (ii) if the answer to the first question is affirmative, then whether the TVPEE is one of the “Taxation Measures of the Contracting Parties other than those on income or on capital” which are subject to the claw-back provision of Article 21(3) of the ECT for the purpose of the MFN treatment obligation set forth in Article 10(7) of the ECT. The Tribunal will first review the Parties' respective position in greater detail in the following paragraphs.

B. WHETHER THE TVPEE IS A TAX MEASURE OF THE RESPONDENT FOR THE PURPOSE OF THE TAX CARVE-OUT PURSUANT TO ARTICLE 21(1) OF THE ECT

(1) The Respondent's Position

392. The Respondent emphasizes that taxation measures of the Contracting Parties are excluded from the scope of protection of the ECT, with the only exceptions stipulated in Article 21

³¹² Cl. Reply, para. 45; Cl. Rej., paras. 97-98. ↩
³¹³ Resp. Rej., para. 167. ↩

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of the ECT³¹⁴, and that Article 10(1) of the ECT does not impose any obligations for the Contracting Parties regarding the taxation measures.³¹⁵

393. The Respondent submits that according to Article 21 of the ECT, the only paragraphs of Article 10 that do apply to taxation measures of the Contracting Parties are paragraphs (2) and (7).³¹⁶

394. The Respondent asserts that the TVPEE is a taxation measure for the purposes of the ECT for two reasons: (i) because it complies with the definition of taxation measure under Article 21 (7)(a)(i) of the ECT, and (ii) because the TVPEE is, in any case, a bona fide taxation measure.³¹⁷

395. Referring to Article 21(7)(a)(i) of the ECT which provides that “the term “taxation measure" includes any provisions relating to taxes of the domestic law of the Contracting Party", the Respondent submits that Law 15/2012 introducing the TVPEE is part of the domestic law of the Kingdom of Spain legislated in accordance with the ordinary legislative procedure provided for in the Spanish Constitution and the rest of the Spanish legal system and as such the provisions relating to the TVPEE are in any case provisions relating to a tax, under the concept of tax of the domestic law of the Kingdom of Spain.³¹⁸

396. The Respondent states that the Spanish Constitutional Court recognized the taxation nature and legality of the TVPEE³¹⁹ and ruled that the said regulation of the TVPEE contained in Law 15/2012 is valid and in accordance with the Spanish Constitution.³²⁰

397. The Respondent states that the TVPEE is a tax of general application to the production of all generation facilities, both renewable and conventional. As such, the provisions on the

³¹⁴ Resp. C-Mem., para. 94. ↩
³¹⁵ Ibid., para. 95. ↩
³¹⁶ Ibid., para 96. ↩
³¹⁷ Resp. Rej., para. 171. ↩
³¹⁸ Resp. C-Mem., paras. 99 and 111. ↩
³¹⁹ Ibid., para. 128-129. ↩
³²⁰ Ibid., para. 130. ↩

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TVPEE of Law 15/2012 are taxation measures for the purposes of Article 21(7)(a)(i) of the ECT, and in any case, the TVPEE is a bona fide taxation measure.³²¹

398. In addition, the Respondent submits that major features of the Law 15/2012 relating to the TVPEE such as taxable event (Article 4), taxpayers (Article 5), tax base (Article 6), tax rate (Article 8) and tax period (Article 13) demonstrate the nature of the TVPEE as a bona fide, general taxation measure.³²²

399. The Respondent asserts that the TVPEE is a tax under international law as well.³²³ To support its submission that the TVPEE is a tax under international law, the Respondent refers to the definition of tax by Black's Law Dictionary which reads as follows:

“tax, n. (14c) A charge, usu. monetary, imposed by the government on persons, entities, transactions, or property to yield public revenue. ”³²⁴

400. The Respondent asserts that the TVPEE meets all the defining characteristics to fall under the concept of tax in international law as used by international arbitration tribunals in EnCana v. Ecuador, Duke Energy v. Ecuador and Burlington Resources v. Ecuador,³²⁵ such that (i) the tax is established by law, (ii) said law imposes an obligation on a class of persons, and (iii) said obligation implies paying money to the State for public purposes.³²⁶

401. In addition, the Respondent points out that the European Commission has recognized the taxation nature of the TVPEE and the conformity of this tax with EU law.³²⁷

402. The Respondent asserts that in order to determine that the TVPEE is a taxation measure for the purpose of the ECT, additional analysis of the TVPEE as argued by the Claimant (whether it is a bona fide tax measure) does not need to be performed. The Respondent

³²¹ Ibid., paras. 72 and 79; Resp. Rej. paras 167-168, 246. ↩
³²² Resp. C-Mem., paras. 73-77. ↩
³²³ Ibid., para. 116; Resp. Rej., para. 173. ↩
³²⁴ Resp. C-Mem., para. 135, quoting Black's Law Dictionary, Ninth Edition, Bryan A. Garner Editor in Chief, p. 1594. (RL-0025) ↩
³²⁵ Resp. C-Mem., paras. 138-140, citing EnCana Corporation v. Republic of Ecuador, LCIA Case No. UN 3481, Award, February 3, 2006, para. 142 (RL-0027) (“EnCana Award”), Duke Energy Electroquil Partners & Electroquil S.A. v. Republic of Ecuador, ISCID Case No. ARB/04/19, Award, August 18, 2008, para. 174 (RL-0033, CL-0108) ("Duke Award”), and Burlington Resources Inc. v. Republic of Ecuador, ISCID Case No. ARB/08/5, Decision on Jurisdiction, June 2, 2010, paras. 164 and 165. (RL-0036) (“Burlington Decision”). ↩
³²⁶ Resp. C-Mem., paras. 141 and 142. ↩
³²⁷ Ibid., para 157. ↩

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submits that in any case, the TVPEE is a bona fide taxation measure and that the Claimant has the burden of proving the alleged bad faith which it has not proved at all.³²⁸

403. The Respondent contends that the good faith analysis of the taxation measures conducted in Yukos v. Russian Federation³²⁹ cited by the Claimant is not applicable in the present case. According to the Respondent, the Yukos tribunal considered extraordinary circumstances (that are not present in this case) and that the taxation measures pursued a purpose that was entirely unrelated to the purpose of raising revenue for the State, such as the destruction of a company or the elimination of a political opponent.³³⁰

404. Citing the tribunal in EnCana v. Ecuador which held that "[t]he question whether something is a tax measure is primarily a question of its legal operation, not its economic impact"³³¹, the Respondent asserts that it is not appropriate to examine the economic effect of the TVPEE as sought by the Claimant.³³²

405. In response to the Claimant's criticism that the TVPEE is disproportionate and discriminatory, the Respondent contends that the TVPEE applies to all producers, both renewable and conventional, and that Law 15/2012 grants the same treatment to all of them, without granting a different treatment to renewable producers (through for example, exemptions, reductions or deductions in the tax).³³³

406. The Respondent submits that the general application of the TVPEE is a legitimate option of the State legislator as recognized by the Spanish Constitutional Court and is linked to the environmental nature of the TVPEE.³³⁴ In support of this submission, the Respondent cites the judgement of the Spanish Constitutional Court of November 6, 2014 which held that “[t]he generalized application of the tax in question [the TVPEE] responds to a choice

³²⁸ Resp. Rej., para. 181. ↩
³²⁹ Yukos Universal Limited (Isle of Man) v. The Russian Federation, PCA Case No. AA 227, Final Award, July 18, 2014, para. 1407 and 1431. (CL-0039) (“Yukos Award"). ↩
³³⁰ Resp. Rej., para. 178. ↩
³³¹ Ibid., para. 179, citing from EnCana Award, para. 142. (RL-0027). ↩
³³² Ibid., para. 180. ↩
³³³ Ibid., para. 186. ↩
³³⁴ Ibid., para. 190. ↩

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of the legislator, who, while respecting constitutional principles, has a wide margin for establishing and defining the tax.”³³⁵

407. The Respondent denies that the TVPEE discriminates against renewable producers from either the perspective of legal repercussions or from the perspective of economic repercussion.³³⁶ The Respondent claims that the TVPEE is one of the costs that are remunerated to renewable producers through the specific remuneration they receive.³³⁷

408. The Respondent submits that the purpose of the TVPEE is to raise revenue for the Spanish State for public purposes and that the TVPEE is a public income of the Spanish State that is integrated into the General State Budget which contributes to form the State resources with which public expenses are financed.³³⁸ In this regard, the Respondent points out that in accordance with the Fifth Additional Provision of Law 17/2012, an amount equivalent to the estimated annual collection arising from the taxes included in Law 15/2012, among which is the TVPEE, is allocated in each year's General State Budget Acts to finance the costs of the electricity system referred to the promotion of renewable energies.³³⁹

409. In support of its position, the Respondent states that in cases like Isolux Infrastructure Netherlands BV v. Spain³⁴⁰, Eiser v. Spain³⁴¹, Novenergia v. Spain³⁴², Masdar v. Kingdom of Spain³⁴³, and Antin v. Kingdom of Spain³⁴⁴ in which the jurisdictional objection related

³³⁵ Judgement 183/2014 of the plenary session of the Constitutional Court of November 6, 2014, (Appeal on grounds of unconstitutionality. 1780/2013), rejecting the appeal of unconstitutionality filed by the Government Council of the Regional Government of Andalusia) in relation to Articles 4, 5 and 8 of Act 15/2012 (and other norms). (R-0043). ↩
³³⁶ Resp. Rej., para. 197. ↩
³³⁷ Ibid., paras. 202-208. ↩
³³⁸ Ibid., para. 211 and 212. ↩
³³⁹ Ibid., para. 213. ↩
³⁴⁰ Isolux Infrastructure Netherlands, B.V. v. Kingdom of Spain (SCC V2013/153)), Award, July 12, 2016, paras. 717-741, (RL-0096) (“Isolux Award"). ↩
³⁴¹ Eiser Infrastructure Limited and Energía Solar Luxembourg S.á.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award, May 4, 2017, paras. 266-272, (RL-0098) (“Eiser Award”). ↩
³⁴² Novenergia II - Energy & Environment (SCA) (Grand Duchy of Luxembourg), SICAR v. Spain (SCC Arbitration (2015/063)), Award, February 15, 2018, paras. 516-525, (RL-0123) (“Novenergia Award"). ↩
³⁴³ Masdar Solar & Wind Cooperatief U.A. v Kingdom of Spain, ICSID No. ARB/14/1, Award, May 16, 2018, para. 257-294, (CL-0175) (“Masdar Award"). ↩
³⁴⁴ Infrastructure Services Luxembourg S.à.r.l. and Energia Termosolar B.V. (formerly Antin Infrastructure Services Luxembourg S.à.r.l. and Antin Energia Termosolar B.V.) v. Kingdom of Spain, ICSID Case No. ARB/13/31, Award, June 15, 2018, para. 300-323 (CL-0182) (“Antin Award"). ↩

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to the TVPEE was also raised, the tribunals sided with the Respondent and declared that they lacked jurisdiction to hear the dispute relating to the TVPEE.³⁴⁵

410. Following the Tribunal's invitation to the Parties, dated October 10, 2019, to introduce into the record relevant and publicly available award/decisions on the renewable energy sector of Spain to that date, which they may consider that the Tribunal may benefit from having at its disposal, the Respondent added new cases supporting its position, thus having declared that they lacked jurisdiction to hear the dispute relating to the TVPEE³⁴⁶. Those cases are Greentech Energy Systems v Spain³⁴⁷, RREEF v Spain³⁴⁸, 9REN v Spain³⁴⁹, NextEra Energy Global v Spain³⁵⁰, Cube Infrastructure v Spain³⁵¹, OperaFund Eco-Invest v Spain³⁵² and SolEs Badajoz v Spain³⁵³.

411. Finally, the Respondent argues that the Claimant has not complied with its burden of proof to properly sustain its allegation that the TVPEE is not a bona fide taxation measure, and that therefore, the tax carve-out of Article 21 of the ECT preserving the taxation powers of the Contracting States must be applied to the full of its consequences and the jurisdiction of this Tribunal regarding this taxation measure must be rejected.

(2) The Claimant's Position

412. The Claimant does not dispute that Article 21(1) of the ECT carves out taxation measures from the scope of protection of Part III of the ECT. However, it asserts that the carve-out

³⁴⁵ Resp. Rej., para. 216; Resp. PHB, paras. 8 and 9. ↩
³⁴⁶ The Respondent's Comments on ECT Precedents, October 25, 2019. ↩
³⁴⁷ Greentech Energy Systems A/S, et al. v. Kingdom of Spain, SCC Arbitration V (2015/150), Award, November 14, 2018, paras. 247-260 (RL-0139/ CL-0201b) (“Greentech Award"). ↩
³⁴⁸ RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Responsibility and on the Principles of Quantum, November 30, 2018, paras. 185-191 (RL-0137) (“RREEF Decision"). ↩
³⁴⁹ 9REN Holding S.a.r.l. v. Kingdom of Spain, ICSID Case No. ARB/15/15, Award, May 31, 2019, paras. 195-208 (RL-0136/CL-0208) (“9REN Award"). ↩
³⁵⁰ NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain, ICSID Case No. 14/11, Award and Decision on Jurisdiction, Liability and Quantum Principles, May 31, 2019/March 12, 2019, paras. 372-373. (RL-0135) (“Nextera Award and Decision"). ↩
³⁵¹ Cube Infrastructure Fund SICAV and others v. Kingdom of Spain, ICSID Case No. ARB/15/20, Decision on Jurisdiction, Liability and Partial Decision on Quantum, February 19, 2019, para. 221-233. (RL-0133/CL-0203) ("Cube Decision"). ↩
³⁵² OperaFund Eco-Invest SICAV PLC and Schwab Holding AG v. Kingdom of Spain, ICSID Case No. ARB/15/36, Award, September 6, 2019, paras. 402-405 (RL-00131), (CL-0211) (“OperaFund Award"). ↩
³⁵³ SolEs Badajoz GmbH v Kingdom of Spain, ICSID Case No. ARB/15/38, Award, July 31, 2019, paras. 272-277. (RL-0134, CL-0209) (“SolEs Award"). ↩

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under Article 21(1) of the ECT does not apply to actions carried out “under the guise of taxation” but which “in reality aim to achieve an entirely unrelated purpose”. Quoting the tribunal in Yukos v. Russia, the Claimant asserts that bona fide taxes are those “that are motivated by the purpose of raising general revenue for the State”.³⁵⁴

413. The Claimant contends that the TVPEE is not a genuine, bona fide taxation measure to which the tax carve-out in Article 21 of the ECT could apply and that it is a disguised, discriminatory tariff cut, introduced to address the tariff deficit.³⁵⁵

414. The Claimant argues that Law 15/2012 imposed an indirect reduction on revenues received by the Solacor Plants from the sale of electricity, including the incentive tariffs and premiums guaranteed under RD 661/2007 by 7% by introducing the TVPEE and was in no way tied to income, operating costs or profitability. As such, its real impact was to reduce the value of the incentives granted to the Solacor Plants in return for the production of renewable energy.³⁵⁶

415. The Claimant does not agree with the Respondent's claim that the TVPEE is “a tax of general application”. The Claimant asserts that the TVPEE had a disproportionate and discriminatory impact on renewable producers. Whereas conventional power producers were partially able to pass through the additional costs imposed by the 7% charge to the electricity price paid by consumers, renewable producers were forced to accept a direct reduction in their income.³⁵⁷

416. The Claimant further asserts that whereas the TVPEE was allegedly justified on environmental grounds, it served no such environmental purpose.³⁵⁸

417. The Claimant argues that the TVPEE fails Spain's own test, since it did not serve a legitimate “public purpose” because the TVPEE does not raise general revenue for the

³⁵⁴ Cl. Reply, para. 46, quoting from Yukos Award, paras. 1407 and 1431 (CL-0039); Veteran Petroleum Limited (Cyprus) v. The Russian Federation, (UNCITRAL, PCA Case No. AA 228) Final Award, July 18, 2012, paras. 1407 and 1431 (CL-0041); and Hulley Enterprises Limited (Cyprus) v The Russian Federation, (UNCITRAL, PCA Case No. AA 226), paras. 1407 and 1431. (CL-0040). ↩
³⁵⁵ Cl. Reply, para. 45(1). ↩
³⁵⁶ Ibid., para. 47. ↩
³⁵⁷ Ibid., para. 48. ↩
³⁵⁸ Ibid., para. 49. ↩

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State; rather their revenues must be used to pay down the self-inflicted tariff deficit.³⁵⁹ The Claimant adds that the TVPEE serves “the exclusive and unrelated purpose of addressing Spain's self-inflicted tariff deficit”.³⁶⁰ The Claimant asserts that Spain has no discretion as to how to allocate the revenues raised through the TVPEE: pursuant to the Second Additional Provision of Law 15/2012, all amounts collected must be used to finance the costs of the Spanish electricity system.

418. In sum, the Claimant contends that while implemented under the disguise of taxation, the TVPEE sought to achieve a purpose entirely unrelated both to their stated environmental aim and to the aim of raising general revenue for the Respondent. The Claimant further asserts that this purpose could have been achieved via a direct cut to the renewable feed-in remuneration tariff, rather than a tax – “an alternative that was only discarded precisely because it was contrary to Spain's commitments under RD 661/2007”.³⁶¹ Accordingly, the Claimant submits that the Respondent cannot benefit from the carve-out extended to bona fide taxation measures by Article 21(3) of the ECT.

419. The Claimant further contends that even if the TVPEE constitutes a tax under domestic Spanish law, domestic law is not determinative in classifying a purported taxation measure. The Claimant argues that investment arbitration tribunals have determined that they must look behind the label and examine the legal properties of a measure to determine whether it is a tax.³⁶²

420. The Claimant asserts that the three investment arbitration cases cited by the Respondent in support of its position do not support the Respondent's arguments because of the difference of the factual situation addressed in these cases.³⁶³

421. Referring to the three-fold test for classifying a measure as a tax asserted by the Respondent, the Claimant contends that this test completely ignores the bona fide criterion established

³⁵⁹ Ibid., para. 56. ↩
³⁶⁰ Ibid., para. 50. ↩
³⁶¹ Ibid., para. 51. ↩
³⁶² Ibid., para. 53. ↩
³⁶³ Ibid., paras. 58-61; Burlington Decision, paras. 164-165 (RL-0036); EnCana Award, para. 142 (RL-0027); Duke Award, para. 174 (RL-0033). These cases were mentioned by the Respondent in Resp. C-Mem., paras. 138-140 in support of the notion “taxation measures” it advanced. See 400 of this Decision. ↩

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by the Yukos tribunal and thus cannot possibly be adequate for the purpose of determining whether a measure should be treated as a tax within the scope of the ECT taxation carve-out.³⁶⁴

(3) The Tribunal's Analysis

422. The Tribunal's analysis starts with the review of the relevant provisions of the ECT. Article 21(1) of the ECT provides that:

“Except as otherwise provided in this Article, nothing in this Treaty shall create rights or impose obligations with respect to Taxation Measures of the Contracting Parties. In the event of any inconsistency between this Article and any other provision of the Treaty, this Article shall prevail to the extent of the inconsistency.”

423. With respect to the definition of “Taxation Measures” for the purpose of Article 21, Article 21(7)(a) and (b) provide, in pertinent part, as follows:

“(a) The term "Taxation Measure" includes:
(i) any provision relating to taxes of the domestic law of the Contracting Party or of a political subdivision thereof or a local authority therein; and
(ii) any provision relating to taxes of any convention for the avoidance of double taxation or of any other international agreement or arrangement by which the Contracting Party is bound.
(b) There shall be regarded as taxes on income or on capital all taxes imposed on total income, on total capital or on elements of income or of capital, including taxes on gains from the alienation of property, taxes on estates, inheritances and gifts, or substantially similar taxes, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation.”

424. Having reviewed the respective submissions of the Parties, the Tribunal finds no difficulty in accepting that the provisions of Law 15/2012 on the TVPEE prima facie fall under “any provision relating to taxes of the domestic law” of the Respondent on a plain reading of Article 21 in view of the following considerations, including but not limited to:

(i) the Law 15/2012 was passed by the Parliament of the Kingdom of Spain in accordance with the ordinary legislative procedure provided for in the Spanish legal

³⁶⁴ Cl. Reply para. 55. ↩

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system, in accordance with Article 133 of the Spanish Constitution that grants the State the original authority to establish taxes by means of law³⁶⁵;

(ii) the preamble of Law 15/2012 clearly stated the public purpose behind the TVPEE and its contribution to the State Budget in the following words³⁶⁶:

“... one of the main concepts of this tax reform will be the internalization of the environmental costs deriving from the generation of electric power, ... Consequently, the Act must serve as a stimulus to improve our levels of energy efficiency, while at the same time making it possible to ensure better management of natural resources and continued progress in the new model of sustainable development from the economic, social, and environmental perspectives.
This reform also contributes to the integration of environmental policies into our tax system, which can accommodate taxes that are specifically environmental in nature, as well as the incorporation of environmental elements into existing taxes.”
“In this sense, and also in order to promote a balanced budget, Title I of this Act establishes a tax on the value of electric power generation, which, in a direct and real manner, taxes the execution of activities that produce and incorporate electric power into the Spanish electrical system.”

(iii) the specific provisions of Law 15/2012 such as taxable event, taxpayers, tax base, tax rate and tax period applicable to the TVPEE indicate that the TVPEE is a tax of general application imposed on the producers of electricity, both renewable and conventional, to generate revenues to the Respondent for public purposes. Those features of the TVPEE are in line with the general concept of a “tax” as illustrated by the definition in Black's Law Dictionary relied on by the Respondent that “[m]ost broadly, the term [tax] embraces all governmental impositions on the person, property, privileges, occupations, and enjoyment of the people, and includes duties, imposts, and excises.”³⁶⁷

425. With respect to the Claimant's assertion that the TVPEE is not a bona fide tax measure, the Tribunal agrees with the Respondent that the Claimant has the burden of proof to sustain its allegation that the TVPEE is not a bona fide tax measure. The Tribunal is of the

³⁶⁵ Resp. C-Mem., paras. 99 and 111, 113 to 115. ↩
³⁶⁶ (C-0372t) ↩
³⁶⁷ Black's Law Dictionary, 10^th Edition, p.1685. ↩

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opinion that the Claimant has not demonstrated its allegation that the TVPEE is not a bona fide tax measure.

426. In the Tribunal view, the economic impact of a tax on a taxpayer could vary for a variety of reasons, and whether certain taxpayers could reduce the effect of tax imposition by passing the burden to consumers should not be the determining factor in deciding the disproportionate and discriminatory impact of a tax. The Tribunal finds it speculative to conclude that conventional power producers were able, although partially, to pass the burden to consumers on the market. The Tribunal also notes the Respondent's statement that the TVPEE is a deductible expense on the Corporations Tax of the TVPEE taxpayers, indicating that means of reducing the tax burden were also available to renewable power producers.³⁶⁸

427. With respect to the Claimant's contention that the TVPEE sought to achieve a purpose entirely unrelated both to their stated environmental aim and to the aim of raising general revenue for the Respondent, this Tribunal does not find any credible basis to discredit the Respondent's submission that the revenue corresponding to the TVPEE is public revenue that is included in the Spanish General Budgets³⁶⁹, which, together with the other State revenue, contributes to form the State's resources with which public expenditures are financed.³⁷⁰ The Tribunal notes the Respondent's further submission that the second additional provision of Law 15/2012 was complemented and made concrete by the fifth additional provision of Law 17/2012, to the effect that an amount equivalent to the estimated annual collection arising from the taxes included in Law 15/2012, including the TVPEE, would be allocated to finance, among the costs of the electricity system provided by the Electricity Sector Law, specifically those relating to the promotion of renewable energy.³⁷¹ The Tribunal notes that in its Rejoinder on Jurisdiction, the Claimant did not specifically rebut the points made by the Respondent on this issue, and simply states that the Claimant confirms and restates its previous allegation.

³⁶⁸ Resp. C-Mem., paras. 125 through 127. ↩
³⁶⁹ Ibid., paras. 147-149. ↩
³⁷⁰ Ibid., para. 150. ↩
³⁷¹ Ibid., para. 152. ↩

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428. The Tribunal agrees with the Respondent that the legislator of a sovereign State has a wide margin of discretion for establishing and defining tax, while respecting Constitutional principles, and the general application of the TVPEE is a legitimate option of the legislator of the Respondent.

429. The Tribunal also agrees with the Respondent that the good faith analysis of the taxation measures conducted in Yukos v. Russian Federation cited by the Claimant is not applicable in the present case. The tribunal in the Yukos case dealt with extraordinary circumstances: there the taxation measures pursued a purpose that was entirely unrelated to the purpose of raising revenue for the State; rather, it aimed at the destruction of a company or the elimination of a political opponent. In the present case, the Claimant has neither presented or substantiated the existence of such extraordinary circumstances.

430. In conclusion, the Tribunal accepts the Respondent's submission that the Claimant has not met its burden of proof that the TVPEE is not a bona fide tax for the purpose of Article 21(1) of the ECT. Accordingly, the Tribunal concludes that the TVPEE is a “Taxation Measure” for the purpose of Article 21(1) of the ECT, consistent with the findings of other investment tribunals in Spanish renewable cases that dealt with the same issue including Isolux, Novenergia, Antin and Masdar, as well as Greentech, RREEF, 9REN, NextEra, Cube, OperaFund and Soles Badajoz, as shown in paras. 409 and 410 above.

C. WETHER THE TVPEE IS A TAXATION MEASURE OTHER THAN THAT ON INCOME OR ON CAPITAL WHICH IS SUBJECT TO THE CLAW-BACK PROVISION OF ARTICLE 21(3) OF THE ECT FOR THE PURPOSE OF THE MFN TREATMENT OBLIGATION

(1) The Claimant's Position

431. The Claimant submits that in the event that the Tribunal were to determine that the TVPEE was considered a bona fide taxation measure for the purpose of Article 21 of the ECT, it should be considered as tax “other than on income or on capital” for the purpose of the claw-back provision of Article 21(3) of the ECT.³⁷² Thus, the standards of FET, MCPS, Non-Impairment and the Umbrella Clause under Article 10(1) of the ECT are applicable to the TVPEE by virtue of Article 10(7) of the ECT that provides for MFN treatment.

³⁷² Cl. Reply, para. 62. ↩

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Accordingly, the Claimant submits that the Tribunal has jurisdiction on matters relating to the TVPEE.³⁷³

432. The Claimant maintains that the TVPEE, if considered a bona fide taxation measure under Article 21(1) ECT, would be a tax other than on income or capital.³⁷⁴ Therefore, contrary to the Respondent's criticism, there is nothing contradictory about the Claimant's argument seeking MFN treatment for the TVPEE.

433. The Claimant submits that in respect of taxes not on income or capital, Article 21(3) of the ECT reincorporates within the scope of the ECT's investment protection certain obligations of treatment imposed on the Contracting Parties under Part III, notably the MFN treatment obligation set forth in Article 10(7). The significance of this is that, for “taxes” which are not imposed on income or capital, an investor can benefit from more favourable provisions in other investment treaties to which Spain is a party, i.e., investment treaties which do not preclude claims relating to Spain's taxation measures.³⁷⁵

434. The Claimant cites Article 21(7)(b) ECT which defines what is meant by taxes on income and capital:

“There shall be regarded as taxes on income or on capital all taxes imposed on total income, on total capital or on elements of income or of capital, including taxes on gains from alienation of property, taxes on estates, inheritances and gifts, or substantially similar taxes, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation.”

435. The Claimant asserts that taxes on income or capital are those imposed on “total income” or “total capital” or on “elements of” either income or capital, but the TVPEE is levied on gross revenues, which is not encompassed within the Article 21 definition.³⁷⁶

436. The Claimant acknowledges that Article 21(7)(b) of ECT does not define what are “taxes imposed on total income, on total capital and on elements of income or capital”.³⁷⁷

³⁷³ Ibid., para. 64. ↩
³⁷⁴ Cl. Rej., para. 104. ↩
³⁷⁵ Cl. Reply, para. 64. ↩
³⁷⁶ Ibid., para. 66. ↩
³⁷⁷ Cl. Rej., para. 107. ↩

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437. In response to the Respondent's argument that the claw-back in Article 21(3) applies only to “indirect taxes”, the Claimant points out that the text of Article 21(3) does not refer to such classification (i.e., direct or indirect taxes), but rather it only refers to taxes “other than those on income or on capital.” The Claimant contends that the Energy Charter Secretariat's Reader's Guide to the Energy Charter Treaty, which the Respondent relies on, does not exclude that indirect taxes may be reviewed under Article 21(3) ECT.³⁷⁸

438. For the interpretation of the term “tax on income”, the Claimant seeks support from the OECD Model Tax Convention. The Claimant asserts that in order to interpret the meaning of the term under Article 21(7)(b) of the ECT, one must resort to Article 2.2 of OECD Model Tax Convention, because the former was drafted mirroring the wording of the latter, as the intention of the ECT's writers was precisely to give the term the same meaning it has in the OECD Model Tax Convention.³⁷⁹ In this regard, the Claimant relies on the official Commentaries to Article 2 of the OECD Model Tax Convention as well as the OECD's classification of taxes, which, according to the Claimant, states that in general terms, “income” is understood as a “net” concept (i.e., calculated as gross revenues minus deductible expenses).³⁸⁰

439. The Claimant submits that the definition in Article 21 of the ECT mirrors that of the OECD Model Tax Convention which includes within the ordinary meaning of “taxes on income” charges on “net income or profits”, but not on gross revenues.³⁸¹ Citing the OECD Factbook – Economic, Environmental and Social Statistics 2014, the Claimant states that “the OECD defines “taxes on income” as “taxes levied on the net income or profits (gross income minus allowable tax reliefs) of individuals and enterprises”.³⁸²

³⁷⁸ Ibid., para. 109. ↩
³⁷⁹ Cl. Reply, para. 67; Cl. Rej., para. 110. The Claimant refers Article 2(2) of the OECD 1992 Model Tax Convention on Income and on Capital (English version), September 1, 2992 which provides that “[t]here shall be regarded as taxes on income and on capital all taxes imposed on total income, on total capital, or on elements of income or of capital, including taxes on gains from the alienation of movable or immovable property, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation.” ↩
³⁸⁰ Cl. Reply, para. 68 and para. 69. In the footnote 94 of Cl. Reply, the Claimant refers to an OECD document entitled “The Classification of Taxes and Interpretative Guide”, 2016 (CL-0157). ↩
³⁸¹ Cl. Reply, para. 67. ↩
^-382Ibid, footnote 92.

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440. The Claimant further points out that the taxes listed in Article 2.3 of Spain's double taxation treaties (“DTT”) include taxes that are levied: (i) on income or profits (net amounts), when the taxpayer is an entity with taxable presence in Spain; (ii) on revenues (gross amount), when such a taxable presence is not met; and (iii) on capital. Thus, taxes levied on revenues (gross amounts) are covered by the DTTs signed by Spain (so they should be within the meaning of the term “taxes imposed on total income, on total capital and on elements of income or capital”), but only to the extent that they are imposed to entities without a taxable presence in Spain. The Claimant asserts that this standard could explain why the TVPEE, which is levied on revenues obtained by entities with taxable presence in Spain (i.e., not matching the afore-mentioned criteria), is not included in the list of taxes drafted in Article 2.3 of the DTTs signed by Spain.³⁸³

441. On this basis, the Claimant submits that the TVPEE should not be considered “tax[es] imposed on total income, on total capital and on elements of income or capital” for the purposes of a DTT, and accordingly, for the ECT either.³⁸⁴ The Claimant further submits that accordingly, by virtue of Article 10(7) of the ECT, the Respondent is obliged to accord to the Claimant the same treatment in respect of the TVPEE as it accords to other foreign investors.

442. In the light of the arguments outlined above, the Claimant invokes the ECT's MFN clause to import the following in respect of the TVPEE:

(i) The FET standard (from Spain-Costa Rica BIT³⁸⁵, Spain-Libya BIT³⁸⁶; Spain-Morocco BIT³⁸⁷, Spain-Ukraine BIT³⁸⁸ and Spain-Uzbekistan BIT³⁸⁹) which does

³⁸³ Ibid, para 69 ii. Here, the Claimant cites Spain's double taxation treaties a vailable at http://www.minhafp.gob.es/es-ES/Normativa%20y%20doctrina/Normativa/CDI/Paginas/CDI_Alfa.aspx ↩
³⁸⁴ Ibid., para. 70. ↩
³⁸⁵ Agreement for the Promotion and Reciprocal Protection of Investments between the Republic of Costa Rica and the Kingdom of Spain, July 8, 1997, Article III (1) (CL-0038/CL-0038t) (Spain-Costa Rica BIT). ↩
³⁸⁶ Agreement between the Kingdom of Spain and the Great Socialist People's Libyan Arab Jamahiriya for the Promotion and Reciprocal Protection of Investments, December 17, 2007, Article 3(1) (CL-0064/CL-0064t) (Spain-Libya BIT). ↩
³⁸⁷ Agreement between the Kingdom of Spain and the Kingdom of Morocco on the Promotion and Mutual Protection of Investments, December 11, 1997, Article 3 (CL-0065) (Spain-Morocco BIT). ↩
³⁸⁸ Agreement for the Promotion and Reciprocal Protection of Investments between Spain and Ukraine, February 26, 1998, Article 3(1) (CL-0037/CL-0037t) (Spain-Ukraine BIT). ↩
³⁸⁹ Agreement for the Promotion and Reciprocal Protection of Investments between the Kingdom of Spain and the Republic of Uzbekistan, January 28, 2003, Article 3(1) (CL-0067) (Spain-Uzbekistan BIT). ↩

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not exclude taxes.

(ii) The obligation to accord the most constant protection and security (from Spain-Costa Rica BIT ³⁹⁰, Spain-Libya BIT³⁹¹, Spain-Morocco BIT³⁹², Spain-Ukraine BIT³⁹³ and Spain-Uzbekistan³⁹⁴) which does not exclude taxes.

(iii) The non-impairment obligation (from Spain-Costa Rica BIT³⁹⁵, Spain-Libya BIT³⁹⁶ and Spain-Morocco BIT³⁹⁷) which does not exclude taxes.³⁹⁸

443. The Claimant submits that if the Tribunal finds that a BIT to which Spain is a Party allows protection under FET and other standards against tax measures, and that the standards of that BIT are more favorable to investors than Article 10 of the ECT, those standards can be applied to the Claimant's claim on the TVPEE by way of Article 10(7) of the ECT. For these purposes, the Claimant relies, inter alia, on Article IV(3) of the Costa Rica-Spain BIT, whose wording is similar to the parallel clause in the BIT between Germany and the Czech Republic allowing the tribunal in Wirtgen³⁹⁹ to affirm jurisdiction against a very similar tax measure.⁴⁰⁰

444. The Claimant admits that four publicly available awards issued by arbitral tribunals analysing Spain's objections to the TVPEE claims (Isolux v. Spain, Novenergia v. Spain, Eiser v. Spain and Masdar v Spain) decided that they did not have jurisdiction over the TVPEE with respect to non-expropriatory breaches (i.e., breaches other than expropriation). Nevertheless, the Claimant argues that in these cases, the respective claimant confronted the respondent's jurisdictional objection only on the basis that the TVPEE was not a bona fide taxation measure to which the tax-carve out in Article 21(1)

³⁹⁰ Spain-Costa Rica BIT, Article 3(1) (CL-0038/CL-0038t). ↩
³⁹¹ Spain-Libya BIT, Article 3(1) (CL-0064/CL-0064t). ↩
³⁹² Spain-Morocco BIT, Article 3 (CL-0065). ↩
³⁹³ Spain-Ukraine BIT, Article 3(1) (CL-0037/CL-0037t). ↩
³⁹⁴ Spain-Uzbekistan BIT, Article 3(1) (CL-0067). ↩
³⁹⁵ Spain-Costa Rica BIT, Article 3(2) (CL-0038/CL-0038t). ↩
³⁹⁶ Spain-Libya BIT, Article 3(2) (CL-0064/CL-0064t). ↩
³⁹⁷ Spain-Morocco BIT, Article 3(2) (CL-0065). ↩
³⁹⁸ Cl. Reply, para 71. ↩
³⁹⁹ Jürgen Wirtgen, Stefan Wirtgen, Gisela Wirtgen and JSW Solar (zwei) GmbH & Co. KG v. Czech Republic, PCA Case No. 2014-03, Final Award, October 11, 2017, para. 270 (RL-0111) (CL-0180) (“Wirtgen Award”); Cl. Opening, slides 19-20; Tr. Day 1 10:25-12:6. ↩
⁴⁰⁰ Cl. PHB, para. 121; Cl. Opening, slides 19-20. ↩

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ECT could apply. The Claimant states that none of these awards have analysed whether the TVPEE would be a tax “other than those on income or on capital” for the purposes of Article 21(3) ECT claw-back provision via the application of the MFN treatment.⁴⁰¹

445. Following the Tribunal's invitation to the Parties, dated October 10, 2019, to introduce into the record relevant and publicly available awards/decisions on the renewable energy sector of Spain to that date, which they may consider that the Tribunal may benefit from having at its disposal, the Claimant submitted that the question was far from settled given the specific legal arguments it submitted to the Tribunal in this arbitration. In this sense, the Claimant underlined that the majority of the New Awards and Decisions have not analysed whether the TVPEE is a “tax on income or on capital” as the claw-back clause in Article 21(3) ECT provides while the tribunals in NextEra and OperaFund argued in brief terms that the TVPEE is a tax on income.

446. With respect to the Respondent's assertion that the ECT prohibits application of Article 10(7) of the ECT so as to impose MFN treatment obligation, the Claimant rebuts the Respondent's interpretation of the ECT provisions as entirely wrong for the following reasons:

(i) Article 21(7)(a)(ii) of the ECT refers to double taxation treaties and similar agreements. However, none of the BITs relied on by the Claimant (to import the FET, MCPS and Non-Impairment standards and Umbrella clause over tax measures) is a “convention, agreement or arrangement” of the type contemplated in Article 21(7)(a)(ii) ECT. The BITs relied on by the Claimant are classic bilateral investment treaties, whose subject-matter provides for standards of investment protection and dispute resolution mechanisms to settle investment disputes. For the purposes of the ECT, BITs are quite different from double taxation treaties and the like. Further none of the BITs relied on by the Claimant include “tax provisions” of the type referred to by Article 21(3) of the ECT.⁴⁰²

⁴⁰¹ Cl. Rej., para. 123. See Isolux Award, paras.717-741 (CL-0151); Eiser Award, paras. 266-272(CL-0149); Novenergia Award, paras. 516-525 (CL-0173); Masdar Award, paras. 257-294 (CL-0175). ↩
⁴⁰² Cl. Rej., paras. 116-117. ↩

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(ii) There is nothing in the above-referred BITs precluding application of the Umbrella clause, FET, MCPS and Non-Impairment standards to the TVPEE. Indeed, in the case Jurgen Wirtgen et al v. Czech Republic (related to a taxation measure) the tribunal confirmed that Article 3(4) of the Germany-Czech Republic BIT shall not “preclude the application of the umbrella clause, the FET and FPSS standards to tax measures.”⁴⁰³ This clause is included with nearly the exact same wording in the Spain-Costa Rica BIT and with a similar content in the Spain-Libya BIT, the Spain-Ukraine BIT, and the Spain-Uzbekistan BIT - all BITs relied on by the Claimant.⁴⁰⁴

(2) The Respondent's Position

447. The Respondent submits that pursuant to Article 21(3) of the ECT, Article 10(7) of the ECT applies only to “Taxation Measures of the Contracting Parties other than those on income or on capital” and therefore does not apply to the TVPEE which is a “tax on income”. Referring to Article 6 (Taxable Base) of Law 15/2012, the Respondent asserts that the TVPEE is levied on the income obtained by the producers of electrical energy derived from the production and incorporation into the electrical system of electric power within the Spanish electricity system.⁴⁰⁵

448. The Respondent contends that the Claimant's arguments on this matter are contradictory and completely unfounded.⁴⁰⁶ The Respondent submits that the arbitral tribunals in previous cases have verified the nature of the TVPEE as a direct tax on income. The Claimant cannot intend that the tax nature of the TVPEE is accepted for the purposes of some provisions of the ECT and that, at the same time, the tax nature of the TVPEE is rejected for purposes of others, at its convenience.

449. In response to the Claimant's argument that the TVPEE is levied on gross income (revenues) not on net income, the Respondent submits that “[t]he fact that the TVPEE is levied on gross income does not prevent the TVPEE from being considered a tax on income

⁴⁰³ Wirtgen Award, para. 270 (RL-0111) (CL-0180). ↩
⁴⁰⁴ Cl. Rej., para. 118. ↩
⁴⁰⁵ Resp. Rej., para. 233. ↩
⁴⁰⁶ Ibid., paras. 222-240. ↩

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for the purposes of the ECT, given that the definition of tax on income contained in the ECT itself does not specifically state that it must be limited to a tax on net income”.⁴⁰⁷

450. On the basis of the text of Article 21(7)(b), the Respondent contends that the ECT does not limit the concept of taxes on income to taxes on net income and that the ECT itself considers taxes on income both those levied on gross income and those levied on net income.⁴⁰⁸

451. The Respondent further asserts that the TVPEE is not an indirect tax and that Article 10(7) only applies to indirect taxes, citing the statement in the “Energy Charter Treaty. A Reader's Guide” published by Energy Charter Secretariat as follows⁴⁰⁹:

“According to Article 21 (2), (3), the principle of non-discrimination in transit and investment matters shall apply to taxation measures other than those on income and capital. This means that this principle remains, in general, applicable with regard to indirect taxes in these two areas.”⁴¹⁰

452. Finally, referring to Article 21(3) (a) of the ECT, the Respondent argues that this article prohibits the application of Article 10(7) of the ECT so as to impose MFN treatment obligations as claimed by the Claimant.⁴¹¹ The Respondent's view is that the BITs invoked by the Claimant are international agreements by which the Respondent is bound and the provisions of those BITs by which standards such as the FET would be extended to taxes are provisions relating to taxes.⁴¹²

(3) The Tribunal's Analysis

453. Article 10(7) of the ECT provides that:

“Each Contracting Party shall accord to Investments in its Area of Investors of other Contracting Parties, and their related activities including management, maintenance, use, enjoyment or disposal, treatment no less favourable than that which it accords to Investments of its own Investors or of the Investors of any other Contracting Party or any third state and their related activities including

⁴⁰⁷ Ibid., para. 237. ↩
⁴⁰⁸ Ibid., para. 238. ↩
⁴⁰⁹ Resp. C-Mem., para. 181; Resp. Rej., para. 239. ↩
⁴¹⁰ The Energy Charter Treaty. A Readers Guide Energy Charter Secretariat, p.39. (RL-0053) ↩
⁴¹¹ Resp. Rej., para. 241. ↩
⁴¹² Ibid., para. 244. ↩

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management, maintenance, use, enjoyment or disposal, whichever is the most favourable.”

454. Article 21(3) of the ECT, in pertinent part, provides that:

“Article 10(2) and (7) shall apply to Taxation Measures of the Contracting Parties other than those on income or on capital, except that such provisions shall not apply to:
(a) impose most favoured nation obligations with respect to advantages accorded by a Contracting Party pursuant to the tax provisions of any convention, agreement or arrangement described in subparagraph (7)(a)(ii) or resulting from membership of any Regional Integration Organization;”

455. Article 21(7) of the ECT provides that for the purpose of Article 21, the term “Taxation Measures” includes “any provision relating to taxes of any convention for the avoidance of double taxation or of any other international agreement or arrangement by which the Contracting Party is bound”.⁴¹³ Article 21(7)(b) provides that:

“There shall be regarded as taxes on income or on capital all taxes imposed on total income, on total capital or on elements of income or of capital...”

456. The application of Article 21(3) of the ECT hinges upon (i) whether the TVPEE is a tax “other than those on income” or is a tax on income, and (ii) whether Article 21(3)(a) of the ECT prohibits the application of Article 10(7) imposing MFN obligations.⁴¹⁴

457. The Tribunal notes that neither Article 21(3) nor Article 21(7) of the ECT adds the word “net” to the word “income”. They simply use the words “taxation measure ... other than those on income” or “taxes on income”. In defining the words “tax on income”, Article 21(7)(b) provides that “[t]here shall be regarded as taxes on income or on capital all taxes imposed on total income, on total capital or on elements of income or of capital...” No further guidance is given in the ECT itself.

458. The general rule of interpretation of the treaties set forth in Article 31(1) of the VCLT provides that “[a] treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose.”

⁴¹³ ECT, Article 21(7)(a)(ii). ↩
⁴¹⁴ Resp. Rej., paras. 241 through 245. ↩

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459. On a plain reading of the text of Article 21(3) and Article 21(7), the Tribunal has difficulty in accepting the Claimant's assertion that tax on income should be interpreted narrowly as “tax on net income”.

460. According to Black's Law Dictionary, “income” is defined as “[t]he money or other form of payment that one receives, usu. periodically, from employment, business, investments, royalties, gift, and the like.”⁴¹⁵ “Net income” is defined as “[t]otal income from all sources minus deductions, exemptions, and other tax reductions”, while “gross income” is defined as “total income from all sources before deductions, exemptions or other tax reductions”.⁴¹⁶

461. In view of the definitions of “income”, “net” and “gross” income as well as “revenue” by Black's Law Dictionary, the Tribunal considers that the phrase in Article 21(7) “all taxes imposed on total income... or on elements of income” does not limit the scope of “tax on income” to “tax on net income”. The words “total income” could be interpreted to refer to something broader than “net income”. Thus, the Tribunal is of the opinion that the TVPEE which is imposed on the revenue (total or gross income) of the electricity produced falls under the scope of a “tax on income” for the purpose of Article 21(3) of the ECT.

462. On this point, the Tribunal sides with the Respondent position that the fact that the TVPEE is levied on revenues, i.e., gross income rather than net income, does not prevent the TVPEE from being considered a tax on income for the purposes of the ECT.

463. The Tribunal does not find convincing the Claimant's argument that in order to interpret the meaning of the term under Article 21(7)(b) of the ECT, one must resort to Article 2.2 of the OECD Model Tax Convention.

464. In the Tribunal's view, this definition in the OECD Fact Book cited by the Claimant was made in the context of explaining the data on total tax revenue shown in that document. The exact wording in the document reads “[t]axes on income and profits cover taxes levied on the net income or profits (gross income minus allowable tax reliefs) of individuals and enterprises”. The Tribunal has not found a clear basis in that document in which “tax on

⁴¹⁵ Black's Law Dictionary, Tenth Edition, p. 880. ↩
⁴¹⁶ Ibid., p. 881. ↩

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income” is defined to mean only the tax on net income for the purpose of interpretation of the OECD Model Tax Convention. Furthermore, the definition under the OECD Model Tax Convention for the purpose of its own purpose could not be a determining factor in interpreting the text of the ECT whose purpose is different from the OECD Model Tax Convention.

D. CONCLUSION ON JURISDICTION

465. In conclusion, based upon the foregoing analysis, the Tribunal determines that the Tribunal lacks jurisdiction to hear disputes relating to the TVPEE, and denies the Claimant's arguments to the contrary. This determination is in line with other tribunals which addressed the same issue such as Isolux, Novenergia, Antin, Masdar as well as Greentech, RREEF, 9REN, NextEra, Cube, and SolEs Badajoz.

VI. LIABILITY

A. OVERVIEW OF THE DISPUTES

466. The Claimant submits that it has invested in the Solacor Plants with legitimate expectations of the application of the remunerative regime at the time of its investment under RD 661/2007, the July 2, 2010 Agreement and RD 1614/2010 (the Claimant refers those as “Regulatory Framework 1” or “RF#1”) for the entire useful life of the Solacor Plants.⁴¹⁷

467. According to the Claimant, under the RF#1, the Claimant was guaranteed an attractive feed-in tariff remuneration scheme for the entire life of the Solacor Plants. However, subsequent to the Claimant's investment, the Respondent drastically altered the regulatory regime governing the remuneration regime applicable to the Solacor Plants through a series of legislations adopted from 2012 through 2014 (the Claimant refers to Law 15/2012, RD-L 2/2013 and MO IET/221/2013 as “Regulatory Framework 2” or “RF#2” and refers to RD-L 9/2013, Law 24/2013 (EPA 2013), RD 413/2014, MO IET/1045/2014, MO IET/1168/2014 and MO IET/1882/2014 as “Regulatory Framework 3” or “RF#3”; RF#2 and RF#3 will collectively be referred to as the “Disputed Measures”, as appropriate) and

⁴¹⁷ Cl. Mem., Sections 2.1.2. and 2.1.3, paras. 1169-1225; Cl. Opening, slide 24. ↩

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thereby frustrated the Claimant's legitimate expectations. The Claimant submits that the Disputed Measures, in particular RF#3, replaced the previous remuneration model by a new remuneration model which was based upon radically different parameters and applied retroactively.

468. The Claimant invokes protection under the ECT to which both Japan and the Kingdom of Spain are Contracting Parties. The Claimant claims that the Respondent breached its obligations under Article 10 of the ECT by implementing the Disputed Measures. Specifically, the Claimant submits that the Disputed Measures constitute: (a) a breach of the commitment to provide stable conditions and to grant the Claimant fair and equitable treatment at any time (Article 10(1)); (b) an infringement of the Claimant's right to full protection and security (Article 10(1)); (c) a breach of the obligation not to impair, through exorbitant or discriminatory measures, the Claimant's investment (Article 10(1)); (d) a breach of obligations with the Claimant and its investment covered by the umbrella clause (Article 10(1)); and (e) an infringement of the Claimant's right to benefit from the MFN treatment under Article 10(7). The Claimant submits that as a result, it has suffered substantial damages and is entitled to full reparation.

469. The Respondent denies both the facts and the grounds on which the Claimant bases its claims and contends that it has not violated any of its obligations under the ECT. The Respondent has at all times fulfilled its obligations under the ECT.⁴¹⁸ The Respondent considers that the Claimant has failed to prove its case.⁴¹⁹

470. The Respondent submits that the Spanish system of support for renewable energies has always been based on the principle of a “reasonable rate of return with reference to the cost of money on the capital market” as an objective, and this principle, which was included in Law 54/1997, has remained in Law 24/2013 and the Disputed Measures. What was guaranteed was that the investments made in the renewable energy installations would obtain reasonable profitability throughout their existence. This does not imply the persistence of a given premium throughout the installation's lifetime. No specific

⁴¹⁸ Resp. C-Mem., para. 9. ↩
⁴¹⁹ Tr. Day 6, 41:20-21. ↩

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commitment not to modify the remuneration regime has been given by the Respondent to the Claimant.

471. The Respondent claims that the Claimant was aware of the fact that the main objective of the Spanish electricity system is to ensure that all consumers have access to electricity under conditions of equality and quality, which implies that access to electricity is made at the lowest possible cost, also taking into account the protection of the environment.⁴²⁰ The Respondent further claims that the Claimant also knew or had to know at the time of its investment that the Spanish Government might adopt changes to the remuneration regime aimed at ensuring the technical and economic sustainability of the Spanish electricity system and correcting situations of over-compensation.⁴²¹

B. APPLICABLE LAW: THE ECT AND THE RELEVANCE OF SPANISH DOMESTIC LAW AND EU LAW

472. The first sentence of Article 42(1) of the ICSID Convention provides that:

“The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties.”⁴²²

473. As the Claimant invokes protection under the ECT, the starting point for issues of the law to be applied is the ECT, which contains the rules of law chosen by the Parties. Article 26(6) of the ECT provides that:

“A tribunal established under paragraph (4) shall decide the issues in dispute in accordance with this Treaty and applicable rules and principles of international law.”⁴²³

474. Accordingly, it follows that the issues in dispute in this arbitration are to be determined in accordance with the ECT and applicable rules and principles of international law. Article 26(6) of the ECT does not include any reference to rules of domestic law nor is there any mention of the law of the European Union.

⁴²⁰ Resp. C-Mem., para. 15. ↩
⁴²¹ Ibid., para. 16. ↩
⁴²² Article 42(1) of the ICSID Convention. ↩
⁴²³ Cl. Mem., para. 936 (footnotes omitted). ↩

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475. The Respondent contends that “in the end this is a case primarily about Spanish law”⁴²⁴, and “necessarily about EU law too”.⁴²⁵ In support of its position on the relevance of EU law, the Respondent quotes the tribunal in Electrabel v Hungary which stated that “EU law has a multiple nature: on the one hand, it is an international legal regime; but on the other hand, once introduced in the national legal orders of EU Member states, it becomes also part of these national legal orders.”⁴²⁶ The Respondent asserts that EU law is applicable to any State Aid scheme within the EU as public order.⁴²⁷

476. Upon a question by the Tribunal on the first day of the Hearing, the Respondent agreed, however, that Article 26 of the ECT sets forth that only international law is applicable.⁴²⁸

477. The Respondent argues in its PHB that EU law is in fact international law directly applicable to the merits of this dispute, in accordance with Article 26 of the ECT and Articles 41 and 42 of the ICSID Rules applicable to this arbitration and therefore the standards invoked by the Claimant must be interpreted in a manner consistent with EU law.⁴²⁹

478. The Respondent contends that Spanish domestic law must be considered to weigh the existence and the scope of the alleged undertakings and obligations assumed by the Kingdom of Spain with the Claimant or its investment. The Respondent points out that the Claimant bases its legitimate expectations on its interpretation of the Spanish regulatory framework and that the obligations which the Claimant considers protected by the umbrella clause can only have arisen in accordance with Spanish law. Therefore, the Respondent asserts, an appropriate resolution to this arbitration requires detailed knowledge of Spanish law.⁴³⁰ In support of its position, the Respondent cites observations of the tribunal in Charanne v. Spain which held that:

⁴²⁴ Tr. Day 1, 215:24-25. ↩
⁴²⁵ Tr. Day 1, 216:8-9. ↩
⁴²⁶ Resp. Opening, slide 15, quoting Electrabel S.A. v. Hungary, ICSID Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability, November 30, 2012, paras. 4.117-4.118 (RL-0002) (“Electrabel Decision”). ↩
⁴²⁷ Resp. Opening, slide 211. ↩
⁴²⁸ Tr. Day 1, 216:20–217:12. ↩
⁴²⁹ Resp. PHB para. 75, referring to Resp. Rej., paras. 64-67 and 1460-1463. ↩
⁴³⁰ Resp. C-Mem., para. 1045. ↩

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“...the key issue is to know whether the regulatory framework existing at the time of the investment had the ability to give rise to a legitimate expectation, protected by international law, that it was not going to be modified or otherwise altered by provisions such as those enacted in 2010.”⁴³¹

479. With respect to the role of the case law of the Supreme Court of Spain, the Respondent clarified at the Hearing that it was not invoking the case law of the Supreme Court as an issue of the merits that should be applied to this case, but arguing it as an essential fact that should shape the legitimate expectations of any investor.⁴³²

480. The Claimant contends that (i) in an international arbitration, domestic law is considered a fact; (ii) Spanish domestic law also includes the ECT; (iii) the Respondent's international responsibility towards the Claimant for breaches of the ECT shall be determined solely under international law; and (iv) the Tribunal is not bound by the analysis of the facts made by the Respondent's domestic courts.⁴³³ The Claimant further submits that its claims do not have to be settled in the light of the interpretation of EU law with regard to EU Directives on Renewable Energies.⁴³⁴

481. The Tribunal agrees with the Claimant's submission that in an international arbitration, domestic law is considered a fact and that the Respondent's international responsibility towards the Claimant for breaches of the ECT shall be determined solely in accordance with the ECT and the applicable rules and principles of international law, these rules and principles being independent and separate from the Respondent's domestic law or the law of European Union. This Tribunal disagrees with the Respondent's proposition that EU law is in fact international law directly applicable to the merits of this dispute. As this arbitration case is between an investor of Japan, one Contracting Party to the ECT which is not a Member State of EU, and the Kingdom of Spain, another Contracting Party to the ECT, the Tribunal considers that EU law could not be viewed as international law for the purpose of Article 26(6) of the ECT.

⁴³¹ Charanne and Construction Investments v. Spain, SCC Case No. V 062/2012, Final Award, January 21, 2016, paras. 494, 498 (“Charanne Award”), cited by Resp. Opening, slide 211 (RL-0049) (CL-0009). ↩
⁴³² Tr. Day 1, 122:19-24. ↩
⁴³³ Cl. Mem., para. 938. ↩
⁴³⁴ Cl. Opening, slide 198; Tr. Day 1, 89:11-16. ↩

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482. However, the Tribunal is of the view that Spanish domestic law including the judgements of the Spanish domestic courts could provide a context in connection with the assessment of the legitimate expectations claimed by the Claimant under Article 10(1) of the ECT.

483. With respect to the issue of TVPEE and the application of MFN provision to the TVPEE, the Claimant has advanced arguments in connection with the applicable law in the merits discussion. However, as the Tribunal has already determined that it lacked jurisdiction over the TVPEE matter, the Tribunal does not find it necessary to review this matter again in the context of the applicable law and the merits of the Claimant's claims.

C. PARTIES' POSITIONS

484. In their submissions on liability, the Parties take opposite views on the legal understanding of Article 10(1) of the ECT, the interpretation and scope of the Respondent's obligations thereunder, the existence and the scope of legitimate expectations as claimed by the Claimant, the assessment of the Disputed Measures in view of the Respondent's obligation under the ECT and their impact upon the Claimant and its investments.

485. While the Claimant states that there is no disagreement between the Parties on the method of interpretation or scope of the fair and equitable treatment (FET) standard in Article 10(1) of the ECT⁴³⁵, it is apparent to the Tribunal that the Parties do not share the same understanding regarding the ECT's object and purpose that must guide the interpretation and scope of relevant provisions in the ECT and the obligations that it comprises.⁴³⁶

(1) The Claimant's position

(a) Date of investment

486. The Claimant submits that the earliest possible date for establishing the investment date for the purpose of determining the Claimant's legitimate expectation could be July 28, 2010 when its Board of Directors adopted a resolution approving the investment in the Solacor

⁴³⁵ Cl. Reply, para. 85. ↩
⁴³⁶ Resp. Rej. para. 1491. ↩

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Project⁴³⁷, but that August 6, 2010, when the Financial Closing took place, is a more accurate date of investment.⁴³⁸

487. Citing the tribunal in Isolux⁴³⁹, the Claimant submits that the test determining the investment date is twofold: the date on which the investment is irreversible, and the date on which the financial risk is assumed.⁴⁴⁰

488. The Claimant claims that it withheld its decision to invest until the July 2, 2010 Agreement with the CSP sector was confirmed through various means including communication from Abengoa⁴⁴¹, the July 2, 2010 Press Release of the Ministry of Industry, Tourism and Commerce as well as the report from Lovells⁴⁴², its legal advisor in Spain and the Ministry's letter to NEXI⁴⁴³.

489. According to the Claimant, its Board of Directors adopted the resolution on July 28, 2010 after receiving the news that the Spanish Government and the CSP sector had reached an agreement that provided stability and guarantee and assured that there would be no revision for the tariffs.⁴⁴⁴ This Board resolution stated that the Financial Closing Date was expected to be in August 2010, and commercial operation expected to commence in March 2012.

490. The Claimant points out that the Financial Closing occurred on August 6, 2010 when a number of agreements necessary for the implementation of the Solacor Project were executed. The agreements entered into on August 6, 3010 included Shareholders Agreements⁴⁴⁵, Loan Agreements with Lenders⁴⁴⁶, EPC Contracts⁴⁴⁷, and O&M

⁴³⁷ Minutes of the Board Meeting (C-0346t). ↩
⁴³⁸ Tr. Day 6, 8:4-8; Cl. PHB, para. 2; In its Opening (slide 60), the Claimant identified July 28, 2010 as the investment date. ↩
⁴³⁹ Isolux Award, paras. 782 and 783 (CL-0151t) (RL-0092). ↩
⁴⁴⁰ Tr. Day 6, 4:8-22; 5:3-4. ↩
⁴⁴¹ Email from Mr. Seage to JGC, July 2, 2010 (C-0217). ↩
⁴⁴² (C-0573) ↩
⁴⁴³ (C-0261) ↩
⁴⁴⁴ Tr. Day 1, 31:7-12. ↩
⁴⁴⁵ Shareholders Agreement signed by CSI, JGC and Solacor Electricidad Uno, S.A. on August 6, 2010 (C-0557); Shareholders Agreement signed by CSI, JGC and Solacor Electricidad Dos, S.A. on August 6, 2010 (C-0558). ↩
⁴⁴⁶ Senior Credit Facility Agreements between SMBC, HSBC, Mizuho and BNP on Solacor Electricidad Dos, S.A., on August 6, 2010 (C-0559); Senior Credit Facility Agreements between SMBC, HSBC, Mizuho and BNP on Solacor Electricidad Uno, S.A., on August 6, 2010 (C-0560). ↩
⁴⁴⁷ Construction Contract among Solacor Electricidad Uno, S.A., Carpio Solar Inversiones, S.A., JGC Corporation, Abener Energía S.A. y Teyma Gestión de Contratos de Construcción e Ingeniería, S.A., Unión Temporal de ↩

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Contracts⁴⁴⁸. The Shareholders Agreements contained the parties' obligation to make regular contribution to the SPV's equity in parallel to drawdowns of the loans from the Lenders. The Claimant submits that on this date the Claimant entered into irreversible commitments to the Solacor Project by executing those agreements. In particular, the Claimant brings to the attention of the Tribunal that the Loan Agreements included the draft regulation of what would later become RD 1614/2010 as Schedule 4.2.2 (g).⁴⁴⁹ In the Claimant's view, these provisions show that the Lenders went ahead with financing because the Solacor Plants were pre-registered and the Lenders relied on the July 2, 2010 Agreement between the CSP industry and the Spanish Government.⁴⁵⁰

491. The Claimant contends that the approval of its Board of Directors on June 7, 2010⁴⁵¹ was for the acquisition of shares for a price of Euro 31,134 only, subject to the closing of the financial structure. In accordance with the approval of June 7, 2010, the Claimant entered into share purchase agreements on June 22, 2010, subject to a buy-back condition under which the Abengoa sellers agreed to buy back the shares to be acquired by JGC if “Financial Close does not occur on or before 2^nd August 2010”. These share purchase agreements did not entail the commitment to make an equity contribution of EUR 34 million. Accordingly, the Claimant argues that either of those two dates does not qualify as an investment date.

(b) Essential characteristics of the Spanish regulatory framework at the time of the Claimant's investment

492. The Claimant submits that the essential characteristics of the Spanish regulatory regime at the time of its investment in 2010 provided stability and its investment was attracted by this regime backed by Spain's promises of stability thereof upon final registration of the

Empresas, Ley 18/1982, Solacor El Carpio II and Abengoa S.A., dated August 6, 2010 (C-0601); Construction Contract among Sola cor Electricidad Dos, S.A., Carpio Solar Inversiones, S.A., JGC Corporation, Abener Energía S.A. y Teyma Gestión de Contratos de Construcción e Ingeniería, S.A., Unión Temporal de Empresas, Ley 18/1982, Solacor El Carpio II and Abengoa S.A., dated August 6, 2010 (C-0602).
⁴⁴⁸ Operation and Maintenance Agreement for Solacor 1 signed between Abengoa Solar España, S.A. and Solacor Electricidad Uno, S.A. (C-0603); Operation and Maintenance Agreement for Solacor 2 signed between Abengoa Solar España, S.A. and Solacor Electricidad Dos, S.A. (C-0604). ↩
⁴⁴⁹ Cl. Opening, slide 83; Tr. Day 1, 37:9-15. ↩
⁴⁵⁰ Tr. Day 1, 37:21-24. ↩
⁴⁵¹ (C-0343) ↩

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Solacor Plants in the RAIPRE. The Claimant claims that it had legitimate expectations in regard to the application of such regime for the entire useful life of the Solacor Plants.⁴⁵²

493. The Claimant submits that Article 30(4) of EPA 1997 mandated the Government to supplement the remuneration of renewable producers with a “premium” set out in the implementing regulations to promote the development of renewable energies to achieve the 12% Objective. The Claimant points out that the Respondent has defined the “premium” in successive Royal Decrees, including RD 661/2007.⁴⁵³

494. The Claimant submits that JGC invested in the Solacor Plants in the CSP sector in Spain on the basis of the economic conditions provided by the Special Regime of RF#1 based upon RD 661/2007 which established an attractive and stable feed-in remuneration scheme and the guarantees of stability offered by the Respondent.⁴⁵⁴ The Claimant states that RD 661/2007 had the following three key elements applicable to renewable energy producers utilizing CSP technology: (i) right to feed-in tariff in kWh for electricity produced; (ii) guarantee that the feed-in tariff would apply during the entire production and lifetime of installations; and (iii) guarantee that the Government would not retroactively revise the feed-in tariff.⁴⁵⁵ According to the Claimant, these were basic conditions of a feed-in system with a purpose to guarantee a stable remuneration to investors so that investors could be confident enough to invest and it could see an investment worthy of value.⁴⁵⁶

495. In further detail, the Claimant claims that RD 661/2007 established seven feed-in rights for CSP producers which were applicable to Solacor 1 and Solacor 2 as follows⁴⁵⁷:

(i) Right to choose on an annual basis, as best suited to the producer, between regulated tariff (FiT) and pool plus premium (FiP) options (Article 24(10));

(ii) Right to sell the full net amount of the electricity produced under both options (Article 17(b));

⁴⁵² Cl. Opening, slides 24-27; Tr. Day 1, 12:17-21. ↩
⁴⁵³ Cl. Mem., paras. 140-141. ↩
⁴⁵⁴ Cl. Mem., para. 91; Cl. PHB, para. 2. ↩
⁴⁵⁵ Transcript Day 1, 14:12-15:4; Cl. Opening, slide 29; Cl. Closing, slide 68. ↩
⁴⁵⁶ Cl. Mem., Section II; Tr. Day 6, 33:11-14. ↩
⁴⁵⁷ Cl. Mem., Section III. 6.2. ↩

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(iii) Right to use back-up fuel and obtain the feed-in remuneration for the electricity attributable to the use of back-up fuel, up to certain limits (Article 2(1)(b)(1));

(iv) Right to receive the feed-in remuneration scheme for an unlimited period of time, thus including the entire lifespan of the Plants (Article 44(3));

(v) Right to receive a feed-in remuneration scheme in which Tariffs, Premiums and Caps & Floors had to be annually updated in accordance with general CPI less 0.25 % until the end of 2012 and less 0.50 % onwards (Article 44(1));

(vi) Right to priority access to the transmission and distribution grid and energy dispatch priority (Article 17(e) and Annex XI(3)); and

(vii) Right to receive a reactive energy supplement for the maintenance of certain stipulated power factor values (which was established at 0.082954 Euro/kWh) (Article 29(1)).

496. The Claimant emphasized that RD 661/2007 established a clear and simple remuneration scheme, offering two options to investors to remunerate CSP production (FiT or FiP) for the entire useful life of the facility.⁴⁵⁸ According to the Claimant, stability is an essential element for the feed-in system to work properly. The Claimant quotes Dr. Padilla's testimony at the Hearing that “this type of regulatory scheme is only effective if the government commits ex ante not to behave opportunistically, changing its key parameters in order to reduce the level of support.”⁴⁵⁹ The Claimant asserts that changes to FiT/FiP should only apply to new plants to reflect technology advances and drops in energy costs.⁴⁶⁰

497. The Claimant submits that the stability of the regulatory regime for investments in the renewable energy sector providing a stable feed-in tariff was the leitmotiv of Spain's acts at the time of the Claimant's investment.⁴⁶¹ The Claimant states that it has decided to invest

⁴⁵⁸ Cl. PHB, para. 5. ↩
⁴⁵⁹ Cl. PHB, para. 7 citing Padilla testimony in Tr. Day 4 [Padilla] 101:19-23. ↩
⁴⁶⁰ Id. ↩
⁴⁶¹ Cl. Opening, slide 29. ↩

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in Spain that promoted stability and a favourable regulatory framework. In support of this proposition, the Claimant cites the award of the Antin v. Spain tribunal which held that:

“In the present case, the preamble of the royal decrees enacted by the Spanish Government – specifically RD 661/2007 and RD 1614/2010 – reflect the Respondent's intention to provide for and guarantee the stability of the legal and economic regime applicable to RE projects. Previous and subsequent acts by State entities, including reports from the CNE, press releases from the Ministry and advertising material prepared together with InvestInSpain, all emphasise the stability of the regulatory regime set forth under RD 661/2007. The stability of the regulatory regime for investments in the RE sector was thus the leitmotiv of Spain's acts at the time of the Claimants' investment.”⁴⁶²

498. The Claimant states that RD 436/2004 included a clause exempting existing facilities from the review and revision of tariffs and premiums in its Article 40(3), which, it submits, was an obvious sign to private investors and the capital markets intended to generate investor confidence by increasing legal certainty.⁴⁶³ The Claimant argues that Spain's intention to respect stability expectations was evidenced during the drafting process of RD 661/2007. The Claimant points out that the initial draft of RD 661/2007 did not contain any language limiting the quadrennial revisions to newly-completed facilities similar to Article 40(3) of RD 436/2004⁴⁶⁴, but that, in view of CNE's critical comment emphasising the fundamental importance of minimizing regulatory instability,⁴⁶⁵ the Government added the last sentence of Article 44(3) to the final version of RD 661/2007, to the effect that the quadrennial reviews of the economic terms would affect new facilities only.⁴⁶⁶ The Claimant argues that this CNE Report was highlighted by the tribunals in the Eiser,⁴⁶⁷Masdar,⁴⁶⁸ and Antin⁴⁶⁹ awards.⁴⁷⁰

499. The Claimant submits that the feed-in tariff model of RD 661/2007 has three major improvements as compared to the previous regime.⁴⁷¹

⁴⁶² Antin Award, para. 548, quoted in Cl. Opening slide 29 (CL-0182). ↩
⁴⁶³ Cl. Mem., para. 204. ↩
⁴⁶⁴ Cl. Reply, para. 228. ↩
⁴⁶⁵ CNE Report 3/2007 (C-0044). ↩
⁴⁶⁶ C. Reply, para. 229. ↩
⁴⁶⁷ Eiser Award, para. 109 (CL-0149). ↩
⁴⁶⁸ Masdar Award, para. 496 (CL-0175). ↩
⁴⁶⁹ Antin Award, para. 541 (CL-0182). ↩
⁴⁷⁰ Cl. Opening, slide 30. ↩
⁴⁷¹ Cl. Opening, slides 33-37. ↩

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500. First, Article 36 of RD 661/2007 defined the FiT and the FiP in absolute amount per kWh for an unlimited time period, to be updated with CPI. For the regulated tariff (FiT), it guaranteed price for kWh for the entire production and for the entire plant's lifetime delinked from the average or reference electricity tariff (“TMR”) set forth in RD 436/2004. The regulated tariff (FiT) value for year 2007 applicable to CSP plants (sub-group b.1.2), up to 25 years was set at 0.269375 Eur/kWh, and thereafter 0.215498 Eur/kWh. No time limit was set. With respect to the FiP applicable to CSP plants, reference premium up to 25 years was set at 0.254000 EUR/kWh; and from year 26, 0.203200 EUR/kWh with lower limit 0.254038 and upper limit 0.343976 EUR/kWh. No time limit was set either for the FiP.

501. The second major improvement was the cap and floor system for the FiP option that guaranteed the investor a minimum if market prices fell beyond a certain price and also guaranteed consumers a capped maximum if market prices rose beyond a certain price.

502. The third major improvement, in the Claimant's view, was the grandfathering provision in Article 44(3). The Claimant maintains that the Spanish Government took notice of the comment of CNE's Report 3/2007 on the importance of minimizing instability in that no retroactive changes should be introduced and decided to lay down a stabilization clause in Article 44(3) of RD 661/2007.⁴⁷² The Claimant submits that while Article 44(3) ensured that the Government had the power to adapt the feed-in tariffs of new installations to the technological learning curve through a revision during 2010 and every four years thereafter, it guaranteed existing CSP plants that the regulated tariff in the FiT option and the upper (cap) and lower (floor) limit values of the FiP option would not be revised during the entire lifetime of the plants.

503. The Claimant cites the Novenergia tribunal in support of its position.⁴⁷³ After reviewing Law 54/1997, RD 436/2004 and RD 661/2007, the Novenergia tribunal agreed with the claimant, who had invested in PV plants, that the statements and assurances in those regulations were indeed aimed at incentivising companies to invest heavily in the Spanish

⁴⁷² Ibid., slide 35. ↩
⁴⁷³ Ibid., slide 36. ↩

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electricity sector and that the claimant made its investment in reliance on the terms provided in RD 661/2007. It further added that “[t]he commitment from the Kingdom of Spain could not have been clearer.”⁴⁷⁴

504. The Claimant also cites the Masdar tribunal, which recognized this provision as a stabilization clause in the following words⁴⁷⁵:

“Particular reliance is placed on stabilisation clauses included in the general regulations, and in particular that which is found in Article 44(3) of RD661/2007.”⁴⁷⁶

505. The Claimant also states that the tribunal in OperaFund confirmed the findings in Novenergia⁴⁷⁷ in the sense that Article 44(3) RD 661/2007:

“contained an express stability commitment that served its purpose of inducing investment in part by shielding investors in Claimants' position from legislative or regulatory changes (including the ones complained of in this matter). The Tribunal, thus, respects the legislative authority of the Respondent State by giving effect to each of the terms in Article 44(3) of RD 661/2007, including its assurance that “revisions [...] shall not affect facilities for which the functioning certificate had been granted[.]”⁴⁷⁸

506. The Claimant asserts that in its concurrent official press release of May 25, 2007⁴⁷⁹the Respondent represented RD 661/2007 as a guarantee of stability which contained specific commitments on legal stability of the regulatory framework.⁴⁸⁰ In support of its assertion, the Claimant quotes the following statements in this official press release of the Spanish Government:

“Future tariff revisions will not affect those installations already in operation. This guarantee provides legal certainty to generators, granting stability to the sector and encouraging its development.”
“The government assigns priority to profitability and stability in the new Royal Decree on renewable energy and cogeneration.”
“The new text, which replaces Royal Decree 436/2004, forms part of the energy policy commitment to promote the use in our country of clean, autochthonous and

⁴⁷⁴ Novenergia Award, para. 667 (CL-0173). ↩
⁴⁷⁵ Cl. Opening, slide 36; Tr. Day 1, 20:21-25. ↩
⁴⁷⁶ Masdar Award, para. 500 (CL-0175). ↩
⁴⁷⁷ Cl. New Cases para. 49. ↩
⁴⁷⁸ OperaFund Award, para. 485 (CL-0211); Novenergia Award, paras. 665-667 and 681 (CL-0173). ↩
⁴⁷⁹ (C-0075t) ↩
⁴⁸⁰ Tr. Day 1, 23:3-4; Cl. Opening, slides 44 and 45. ↩

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efficient sources of energy. The government's commitment to this energy technologies has been the reason why in the new regulation stability in time is sought allowing business owners to plan in the medium and long term, as well as a sufficient and reasonable return which, like the stability, makes the investment and engagement in this activity attractive.”

507. The Claimant further claims that this official press release spoke about an increase in the remuneration for CSP projects⁴⁸¹ in the following words:

“In the case of technologies requiring a boost because of their limited development, such as biomass, biogas and thermosolar, the return is increased to 8% in the option for ceding to distributors, and between 7% and 11% for those participating in the market.”
“Under the option for sale to distributor, there is an increase in the remuneration for wind, biomass, biogas and thermosolar ...”
“Thus, increases in the regulated tariff compared with that envisaged in Royal Decree 436/2004 are ... 17% for thermosolar installations...”

508. The Claimant submits that RD 661/2007 was a great call on investors and the press release coming from the Government provided specific assurances for investors.⁴⁸² The Claimant states that the investors and associations welcomed and praised RD 661/2007, and the CSP installed capacity grew substantially after the enactment of RD 661/2007, from 61 MW in 2008 to 1950 MW in 2012.⁴⁸³ In this regard, the Claimant stated in its opening statement on the first day of the Hearing that it was totally wrong for the Respondent to state that this Royal Decree was detrimental and was affecting existing investors.⁴⁸⁴

509. The Claimant submits that the prevailing view among ECT tribunals such as Eiser,⁴⁸⁵Novenergia,⁴⁸⁶Masdar,⁴⁸⁷ and Antin⁴⁸⁸ is that RD 661/2007 offered a favorable framework for renewable investors to encourage their investment in the CSP sector.⁴⁸⁹ For instance, the Antin tribunal found that “through the compensation system offered in RD 661/2007,

⁴⁸¹ Cl. Opening, slide 47; Tr. Day 1 23:8-12. ↩
⁴⁸² Tr. Day 1, 24:3-5; Cl. Opening, slide 48. ↩
⁴⁸³ Cl. Opening, slide 39, citing Compass Lexecon First Expert Report, Sec. 4.2.2. (CER-0001). ↩
⁴⁸⁴ Tr. Day 1, 22:18-20. ↩
⁴⁸⁵ Eiser award, para. 365 (CL-0149). ↩
⁴⁸⁶ Novenergia award, paras. 665, 667, 688 and 679 (CL-0173). ↩
⁴⁸⁷ Masdar award, para. 496(i) (CL-0175). ↩
⁴⁸⁸ Antin award, para. 540 (CL-0182). ↩
⁴⁸⁹ Cl. Opening, slide 42. ↩

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Spain sought to encourage further investments in its RE sector to meet the targeted growth in certain technologies.”⁴⁹⁰

510. The Claimant points out that the Spanish Government put in place a marketing campaign to attract investments into the renewable sector in Spain, including promotional pamphlets of IDAE⁴⁹¹, Invest in Spain's roadshows⁴⁹² as well as a speech by the Spanish Secretary of State for Energy, Dr. Uribe, at the US-Spain Business Sustainability Forum in 2009. The Claimant quotes Mr. Uribe stating that “Feed-in-tariff mechanisms have provided a reliable and stable regulatory environment.”⁴⁹³

511. The Claimant emphasizes that the representatives of the Respondent (people working in Invest in Spain and IDAE)⁴⁹⁴ who met with JGC representatives conveyed the same messages. The Claimant specifically refers to the JGC's meeting in June 2009 with Ms Manuela Garcia of Invest in Spain who, after the meeting, sent Mr. Sibuya of JGC a file explaining the Spanish legal framework governing CSP installations in Japanese.⁴⁹⁵ The Claimant stresses that the official press release of May 25, 2007 was expressly quoted in the presentation by Ms Manuela García to the Claimant which reads that “[a]ny revision in the feed-in-tariff thereafter will not apply to the plants already in operation. This is the commitment to the stability and development of this sector which is to be a legal backup for generators.”⁴⁹⁶

512. The Claimant's understanding of the subsequent development in the legal framework for CSP installations through its due diligence, was that RD-L 6/2009 made access to RD 661/2007 stricter by requiring pre-registration in the newly set-up Remuneration Pre-

⁴⁹⁰ Antin award, para. 540 (CL-0182). ↩
⁴⁹¹ IDAE, The Sun can be yours, 2005 (C-0072); IDAE, The Sun can be yours, 2007 (C-0073); Cl. Opening, slide 50; Tr. Day 1, 24:16-17. Mr. Endo of JGC stated that IDAE was an administrative a gency dependent on the Spanish Government focused on improving energy efficiency, renewable energies and other low-carbon technologies. See CWS-ME1, footnote 6. ↩
⁴⁹² Invest in Spain Roadshow, Opportunities in Renewable Energy in Spain, November 15, 2007 (C-0090); (C-0582) cited in the Claimant's Opening slides 51 and 52. Mr. Endo of JGC stated that Invest in Spain was an administrative unit of the Spanish Government in charge of promoting foreign investment in Spain. See CWS-ME1, footnote 5. ↩
⁴⁹³ Speech in Los Angeles on October 26, 2009, cited in Cl. Opening, slide 53 (C-0482); Cl. Mem., para. 1158.. ↩
⁴⁹⁴ Tr. Day 1, 24:6-12. ↩
⁴⁹⁵ Invest-in Spain, presentation to JGD, June 18, 2009 (C-0092, in Japanese). ↩
⁴⁹⁶ (C-0093), cited in Cl. Opening, slide 55; Cl. Mem. Para. 1077(i). ↩

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Assignment Register prior to registration with RAIPRE, but the successful pre-registration would guarantee access to the benefits of RD 661/2007, subject to compliance with specific deadlines and conditions.⁴⁹⁷ In the Claimant's view, the purpose of RD-L 6/2009 was to accelerate investment during 2009 by providing further guarantees of stability and legal certainty to investors, particularly project developers who at the time of RD-L 6/2009 met the conditions to obtain registration in RAIPRE.⁴⁹⁸ In this connection, the Claimant asserts that the additional requirement of registration in the Remuneration Pre-Assignment Register was essential in that under Article 4(2) of RD-L 6/2009, CSP plants that were pre-registered and finally registered within a 36 month window would have the right to receive the feed-in tariff of RD 661/2007.⁴⁹⁹

513. The Claimant claims that in the Resolution of the Council of Ministers of November 13, 2009⁵⁰⁰, the Government wilfully assumed responsibility for the sustainability of the tariff deficit.⁵⁰¹ The Claimant asserts that based on an analysis on the mid-term integration of renewable generation for the period 2009-2014, the Council of Ministers decided to absorb the over-capacity situation beyond the 200 MW limit set by RD 661/2007 by deferring the entrance of operation on a staged basis.⁵⁰² The Claimant argues that this Resolution was an additional confirmation of the Respondent's commitment to the feed-in regime set forth under RD 661/2007, since it confirmed that that feed-in regime would remain applicable to pre-registered installations.⁵⁰³ In the Claimant's view, in November 2009, the Government of Spain was fully aware of, and decided to accept, the consequences of over-capacity by putting priority on reaching the objectives of renewable energy production and attracting investment.⁵⁰⁴

514. The Claimant also points out that the official press release issued by the Council of Ministers on the same day⁵⁰⁵ affirmed Spain's aim to become the world's undisputable

⁴⁹⁷ Cl. Mem., paras. 314 – 326; Cl. Opening, slide 66. ↩
⁴⁹⁸ Cl. Mem., para. 315. ↩
⁴⁹⁹ CL. PHB., para. 10. ↩
⁵⁰⁰ Resolution of the Spanish Council of Ministers, November 13, 2009 (C-0134) (R-0098). ↩
⁵⁰¹ Cl. Opening, slide 67. ↩
⁵⁰² Cl. Mem., paras. 327-338. ↩
⁵⁰³ Cl. Mem., para. 328. ↩
⁵⁰⁴ Tr. Day 1, 28:18-29:2. ↩
⁵⁰⁵ Official Press Release of the Council of Ministers of November 13, 2009 (C-0138t). ↩

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leader in CSP technology⁵⁰⁶ and underlined the Respondent's expectation that this Resolution would provide project developers with the “necessary certainty” to plan their investment.⁵⁰⁷ The Claimant states that the Respondent's decision to honor the expectations of projects already registered in the Remuneration Pre-Assignment Register was a positive (and relevant) signal for JGC.⁵⁰⁸

515. The Claimant states that both Solacor 1 and Solacor 2 were successfully pre-registered with the Remuneration Pre-Assignment Register as phase 2 facilities on December 11, 2009, with a 36 months window for completion.⁵⁰⁹ The Claimant points out that in their respective pre-registration documents, it was explicitly stated that the facilities were “granted the economic regime regulated in Royal Decree 661/2007, May 25.”⁵¹⁰ The Claimant emphasizes that the documents the Solacor Plants received from the Ministry for the confirmation of pre-registration were titled as “resolution” from the General Directorate for Energy Policy and Mining⁵¹¹ which, the Claimant submits, is a specific commitment.⁵¹² The Claimant refers to the explanation of Lovells in its memorandum of July 2009 which stated that “[t]he Plants shall be entitled to receive the feed-in tariff of RD 661/2007 provided that they are effectively registered in the Pre-Assignation Registry after the end of the 30 days term established in RD-Law 6/2009.”⁵¹³ The Claimant submits that consequently Solacor 1 and Solacor 2 were guaranteed the application of the feed-in remuneration scheme established in RD 661/2007, provided that they were finally registered in RAIPRE and started the sale of energy before January 1, 2013.⁵¹⁴ The Claimant states that Solacor 1 was finally registered in RAIPRE on January 19, 2012 and started the sale of energy on January 22, 2012, and that Solacor 2 was registered in RAIPRE on February 21, 2012 and started the sale of energy on February 21, 2012.⁵¹⁵

⁵⁰⁶ Cl. Opening, slide 68. ↩
⁵⁰⁷ Cl. Mem., para. 340. ↩
⁵⁰⁸ Ibid., para. 547. ↩
⁵⁰⁹ Ibid., paras. 344-346. ↩
⁵¹⁰ Registration of Solacor 1 in Pre-assignment Register, December 11, 2009 (C-0141); Registration of Solacor 2 in Pre-assignment Register, December 11, 2009 (C-0142). ↩
⁵¹¹ Tr. Day 1, 30:2-8 ↩
⁵¹² Tr. Day 1, 31:4 ↩
⁵¹³ Cl. Opening slide 64, citing Legal Due Diligence Report issued by Lovells on July 15, 2009, p.18 (C-0566). ↩
⁵¹⁴ Cl. Mem., para 347. ↩
⁵¹⁵ Ibid., para. 348. ↩

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516. The Claimant asserts that JGC only considered seriously investing in the Solacor Plants after their pre-registration was confirmed.⁵¹⁶ According to the Claimant, soon after the Solacor Plants were registered with the Pre-Assignment Register, the Lenders reached an agreement to constitute a banking syndicate to finance the construction of the Solacor Plants and NEXI started an internal due diligence process for the issuance of its OULI policies.⁵¹⁷

517. In the meantime, according to the Claimant, JGC and Abengoa Solar were busy finalizing the EPC Contracts and the O&M Contracts for the construction of the Solacor Plants and began drafting a share purchase agreement, whereby JGC would acquire 26% stakes in the Solacor SPVs.⁵¹⁸

518. The Claimant states that in May 2010, it learned the news that the Spanish Government and Protermosolar were negotiating potential regulatory changes to the regulatory framework applicable to CSP plants.⁵¹⁹ JGC did wait and see what would come out of the negotiations, how the situation would pan out.⁵²⁰

519. In the Claimant's view, what took place between the Ministry and the CSP industry sector on July 2, 2010 was an “agreement” under which the whole CSP sector (and wind sector) accepted certain economic sacrifices to contribute to mitigate the tariff deficit.⁵²¹ According to the Claimant, the CSP sector agreed to the following sacrifices: (i) the FiT option only for the first year of operation even for existing plants (plus 15% of natural gas); (ii) the limit in the equivalent number of hours of operation entitled to FiT/FiP; and (iii) delay in the entry into operation for certain plants including Solacor 1 and Solacor 2.⁵²² The Claimant states that the CSP sector's agreement outlined above was included in the July 2, 2010 Press Release of the Ministry.⁵²³

⁵¹⁶ Cl. Opening, slide 72. ↩
⁵¹⁷ See Cl. Mem., paras. 548-558. ↩
⁵¹⁸ Cl. Mem., para. 559. ↩
⁵¹⁹ Ibid., para. 560. ↩
⁵²⁰ Tr. Day 6, 29:16-21. ↩
⁵²¹ See Cl. Mem., Sections 9.2-9.5. ↩
⁵²² Cl. Opening, slides 107, 110-115. ↩
⁵²³ July 2, 2010 Press Release (C-0040t). ↩

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520. In compensation for this (quid pro quo), the Claimant claims, the Respondent (i) agreed to extend the protections existing in Article 44(3) of RD 661/2007 in Article 4 of RD 1614/2010 and (ii) delivered Acceptance Letters to CSP plants including the Solacor Plants which confirmed the application of the remuneration regime of RD 661/2007 to their entire useful life, i.e., a message of legal security, assuring the stability of the regulatory framework for the CSP sector the future.⁵²⁴

521. In this regard, the Claimant points out that the July 2, 2010 Press Release included the statement of the Spanish Government guaranteeing stability of the regulatory framework for the CSP sector. The Claimant emphasizes that legal stability was one essential element of the July 2, 2010 Agreement.⁵²⁵ The statement quoted by the Claimant in the July 2, 2010 Press Release reads as follows:

“The agreements include short-term measures that will reduce the impact of these technologies on the price of electricity, as well as long-term measures which will provide these technologies with stability and certainty for their future development.”⁵²⁶

522. The Claimant points out that the July 2, 2010 official press release referred to the outcome of the negotiations the Ministry held with Protermosolar and AEE with the noun ‘acuerdo’ or the verb ‘acordar’ (Spanish word for ‘agreement’ and ‘to agree’), or the noun ‘pacto’ (Spanish word for ‘pact’).⁵²⁷ The Claimant considers the July 2, 2010 Agreement equivalent to a global regulatory pact, and thus binding.⁵²⁸ Referring to Dr. Crespo's testimony at the Hearing that “[t]here is an agreement between two parties, and I understand that any agreement of that kind is binding”⁵²⁹ and that “all that was negotiated and agreed was reflected in December in Royal Decree 1614”,⁵³⁰ the Claimant asserts that it is a binding agreement.⁵³¹ The Claimant points out that the Respondent's authorities and representatives confirmed the existence of agreements in various occasions.⁵³²

⁵²⁴ Cl. PHB, para. 40; See also Cl. Opening, slides 107-108 and Tr. Day 1, 34:25-35:9. ↩
⁵²⁵ Cl. Mem., para. 394. ↩
⁵²⁶ Cl. Opening, slide 112, quoting (C-0040t) p.1. ↩
⁵²⁷ Cl, Mem., para. 384. ↩
⁵²⁸ Cl. PHB. Section 3.1 ↩
⁵²⁹ Tr. Day 2 [Crespo] 146:25-147:2. ↩
⁵³⁰ Ibid., 147:5-7. ↩
⁵³¹ See Cl. Mem., Section 9.6. ↩
⁵³² Id. ↩

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523. Maintaining that JGC withheld its decision to invest until the July 2, 2010 Agreement with the CSP sector was confirmed, the Claimant stresses that this Agreement was an essential feature of the Claimant's legitimate expectations.⁵³³ According to the Claimant, at that moment when the sector was building the plants and had to get finance in order to get money for the construction of the plants, it was necessary for the sector to receive a message of stability. The Claimant states that Solacor 1 and Solacor 2 were in that situation.⁵³⁴ It claims that JGC and Abengoa Solar (as co-sponsors), the Lenders and NEXI were reassured by the July 2, 2010 Agreement that the remuneration regime of RD 661/2007 would be applicable during the entire lifetime of the Solacor Project.⁵³⁵

524. The Claimant points out that the contents of the July 2, 2010 Press Release of the Ministry was confirmed in parallel by the press release on the same day (July 2, 2010) issued by Protermosolar representing the CSP industry.⁵³⁶

525. The Claimant further points out that the email from the Ministry to Dr. Crespo dated July 8, 2010 referred to the document attached thereto as “Agreement with the Solar Thermal Sector”.⁵³⁷ The Claimant emphasizes that the attached document, on official paper with the coat of arms of the Kingdom of Spain and the logo of Protermosolar, used the term “agreement” a number of times and included the contents of what was agreed between the Ministry and the CSP sector. The Claimant points out that in this document, the Respondent decided to raise the limit of use of gas during the first year of operation up to 15%. Further, this agreement made it explicit that Article 44(3) of RD 661/2007 would be amended so that any future revisions of the “premiums” would not affect existing facilities either..⁵³⁸

526. The Claimant claims that the Respondent gave the message of stability not only through unilateral instruments like the July 2, 2010 Press Release, but also in legal instruments like

⁵³³ Cl. PHB, para 40. ↩
⁵³⁴ Tr. Day 1, 52:16-21. ↩
⁵³⁵ Cl. PHB, para. 40. ↩
⁵³⁶ Tr. Day 1, 54:3-6, referring to Press release issued by Protermosolar on July 2, 2010 (C-0222/C-0222t). ↩
⁵³⁷ (C-0219t) ↩
⁵³⁸ (C-0219t) para. 3 of the Agreement with the Thermosolar Sector; Tr. Day 1, 58:17-21. ↩

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RD 1614/2010 and the bilateral relationships with each CSP plant through, what the Claimant terms, the “declaratory contracts”.⁵³⁹

527. The Claimant states that the first full draft royal decree with all the provisions covered by the July 2, 2010 Agreement was revealed by the Respondent on June 30, 2010. The Claimant states that on the same day the Respondent issued a “comfort letter” to NEXI.⁵⁴⁰ The Claimant argues⁵⁴¹ that specific commitments or assurances came from this letter of the General Directorate for Energy Policy and Mining to the Chairman of the Board of NEXI confirming that the Ministry was “initiating today the procedure for the approval of the revised regulation for Concentrated Solar Power technology in Spain. The new Royal Decree includes the results of the meetings maintained with the sector for the last weeks.”⁵⁴²

528. The Claimant submits that the July 2, 2010 Agreement was converted into two specific legal instruments. The first was RD 1614/2010 issued by the Respondent to cover almost all legal commitments under the July 2, 2010 Agreement. The second was the exchange of an offering letter issued by a CSP plant and an acceptance letter, in response thereto issued by the Ministry regarding the delay of the operation of the plant (which the Claimant refers as “declaratory contract”).⁵⁴³ The Claimant asserts that in both instruments, the Respondent reaffirmed the grandfathering of the remuneration regime from which Solacor 1 and Solacor 2 were entitled to benefit, upon completion and registration in RAIPRE, against subsequent changes.⁵⁴⁴

529. The Claimant points out that the Respondent stated in its own words that the new regulations of RD 1614/2010 were agreed with the wind and CSP sectors in July 2010.⁵⁴⁵ Explaining the background of RD 1614/2010, the Council of Ministers Reference dated December 3, 2010 stated that the new regulations “which were agreed with both sectors [the wind and CSP technologies] last July”, involved

⁵³⁹ Tr. Day 1, 52:22-53:2; 34:10-17. ↩
⁵⁴⁰ Tr Day 1, 61:1-11. ↩
⁵⁴¹ Tr. Day 1, 36:1-13 referring to (C-0258); Cl. Opening, slide 81. ↩
⁵⁴² (C-0261) ↩
⁵⁴³ Tr. Day 1, 46:13-18. ↩
⁵⁴⁴ Tr. Day 1 46:18-24. ↩
⁵⁴⁵ Tr. Day 1 61:20-23, referring to (C-0277) Council of Ministers Reference dated December 3, 2010. ↩

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“reinforcement of the visibility and stability of the regulation of these technologies in the future, and guarantees the present premiums and tariffs of Royal Decrees 661/2007 as of 2013 for installations in operation and for those included on the pre-register.”⁵⁴⁶

530. The Claimant maintains that RD 1614/2010 incorporated the July 2, 2010 Agreement as follows⁵⁴⁷:

(i) Compulsory first year of operation under FiT option (+15% natural gas) (Article 3);

(ii) Limit to the number of equivalent hours of operation entitled to FiT/FiP, also guaranteed against subsequent regulatory changes (Article 2); and

(iii) Grandfathering including the premium: no subsequent regulatory changes would affect the tariff, premium and cap & floor, extending Article 44(3) of RD 661/2007 to the Premium (Article 4).

531. The Claimant claims that it is necessary to read Article 44(3) of RD 661/2007 and Article 4 of RD 1614/2010 together to understand that, according to the Spanish legislation, no subsequent regulatory changes would affect the tariff, premium and cap and floor.⁵⁴⁸

532. The Claimant asserts that Article 4 of RD 1614/2010 is a stabilization clause of the remuneration regime under RD 661/2007 for the Solacor Project, citing the tribunal in Masdar v. Spain which observed that “Article 4 of RD1614/2010 of 7 December 2010 also included a “stabilisation commitment: in terms similar to those of Article 44.3.”⁵⁴⁹

533. The Claimant contends that, contrary to the Respondent's argument that RD-L 14/2010, adopted in 16 days after RD 1614/2010, is the acid test showing that there was no such agreement as the alleged July 2, 2010 Agreement (see para. 693 infra), it was an unequivocal reference to the agreement with the CSP and Wind subsectors, claiming that the Respondent expressly acknowledged that the CSP and Wind subsectors had made contributions to cuts in the regulated costs of the electricity system, contrary to the PV

⁵⁴⁶ Press Release issued by the Council of Ministers on December 3, 2010, p.3 (C-0277t). ↩
⁵⁴⁷ Cl. Opening, slide 137. ↩
⁵⁴⁸ Tr. Day 1, 63:11-18. ↩
⁵⁴⁹ Cl. Opening, slide 138, citing Masdar Award, para. 502 (CL-0175); Cl. PHB, para. 56. ↩

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subsector. The Claimant points out that RD-L 14/2010 contained major changes to the regulatory framework applicable to the PV subsector, not applicable to the CSP or Wind subsectors.⁵⁵⁰

534. The Claimant submits that one of the contents of the July 2, 2010 Agreement which was not incorporated in RD 1614/2010 was the industry's agreement of the delay in the entry into operation of the plants. This agreement was implemented through the exchange of an offering letter signed by a CSP plant and a letter accepting such an offer executed by the Ministry of Energy. In the case of the Solacor Plants, the offering letters were executed by each Solacor Plant on December 1, 2010 (“Offering Letters”), and the acceptance letters were sent to each of them by the Ministry of Energy on March 1, 2011 (“Acceptance Letters”).⁵⁵¹

535. The Claimant states that the Offering Letters contained the waiver of the right of the entry into operation and a request for a resolution of the Ministry communicating the economic conditions applicable to the operational life of the offering plant. In response, the Claimant asserts, the Acceptance Letters included the acceptance of the waiver in the Offering Letters and the communication of the economic conditions applicable to the operational life of the specific plant, subject only to have the annual updates foreseen in RD 661/2007.

536. Pointing out that the Acceptance Letters sent to each Solacor Plant on March 1, 2011 included statements reproducing the economic regime applicable to each of the Solacor Plants according to Articles 2, 3 and 4 of RD 1614/2010, the Claimant submits that the Offering Letters sent by each of the Solacor Plants and the Acceptance Letters sent by the Respondent constituted a specific assurance to each of the Solacor Plants and as such created legitimate expectations in JGC.⁵⁵²

537. The Claimant claims that the Offering Letters of Solacor 1 and Solacor 2 and the Ministry of Energy's Acceptance Letters should be viewed as “declaratory contracts” and reaffirmed the grandfathering of RF#1 for Solacor 1 and Solacor 2. The Claimant claims

⁵⁵⁰ Cl. Mem., paras. 432-438. ↩
⁵⁵¹ Offering Letters sent by Sola cor Plants (C-0294) (C-0296); Acceptance Letters issued to Solacor Plants. (C-0295) (C-0297). ↩
⁵⁵² Cl. PHB, para. 57. ↩

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that these declaratory contracts were also the bases of the Claimant's legitimate expectations concerning the application of the Special Regime under the RD 661/2007 and RD 1614/2010 for the entire useful life of Solacor 1 and Solacor 2.⁵⁵³ The Claimant further asserts that the July 2, 2010 Agreement and the exchange of Offering and Acceptance Letters create binding obligations under Spanish law.⁵⁵⁴

538. The Claimant disagrees with Professor Vaquer's opinion that the Acceptance Letter provided the information in response to a request for information in the Offering Letter. Pointing out the text in the Offering Letter “request for a Resolution communicating the remuneration conditions for the operational life of the facility”⁵⁵⁵, the Claimant contends that the Solacor Plants were not requesting information, but were trying to get confirmation of a right from the administration.⁵⁵⁶

539. In support of its position, the Claimant cites the Masdar award which regarded the Acceptance Letters as the basis of its finding of Spain's breach of ECT's FET. In the words of the Masdar tribunal,

“It would be difficult to conceive of a more specific commitment than a Resolution issued by Spain addressed specifically to each of the Operating Companies, confirming that each of the Plants qualified under the RD661/2007 economic regime for their “operational lifetime”.⁵⁵⁷

540. In response to the Respondent's criticism of the Masdar tribunal⁵⁵⁸, the Claimant contends that the Respondent was responsible for drafting both Offering and Acceptance Letters and that the Acceptance Letters specifically answered the Solacor Plants' requests in the Offering Letters to be communicated the remuneration conditions applicable to their “operational lifetime.” Thus, in the Claimant's view, a literal and contextual interpretation of the Offering Letters and Acceptance Letters cannot lead to a conclusion different from the Claimant's.⁵⁵⁹

⁵⁵³ See Cl. Opening, slides 140-151; Cl. Mem., Section 9.8. ↩
⁵⁵⁴ Cl. PHB, para 59. ↩
⁵⁵⁵ For Solacor 1 (C-0294); for Solacor 2 (C-0296). ↩
⁵⁵⁶ Tr. Day 6, 22:18-24; 23:9-11. ↩
⁵⁵⁷ Cl. PHB, para. 58, citing Masdar Award, para. 520 (CL-0175). ↩
⁵⁵⁸ Tr. Day 1, 228:17-229:3; ↩
⁵⁵⁹ Cl. Closing, slide 48; Cl. PHB, para. 58. ↩

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(c) Timely registration of the Solacor Plants in RAIPRE

541. The Claimant submits that as the Solacor 1 and Solacor 2 Plants were successfully registered in RAIPRE within the prescribed timeframe, the former on January 19, 2012 and the latter on February 21, 2012⁵⁶⁰, they were entitled to the benefits of the Special Regime of the RD 661/2007 feed-in model as modified by RD 1614/2010.

542. The Claimant quotes the testimony of Mr. Soler Babot who highlighted the importance of registration in RAIPRE at the Hearing by stating that it was:

“the assurance that we could benefit from the economic regime of Royal Decree 661. That was very important for any investor. It was very important for the banks, for the lenders, for NEXI as an insurer; for everybody.”⁵⁶¹

543. The Claimant asserts that registration in RAIPRE was conditio sine qua non for the CSP plants to benefit from the RD 661/2007 regime in accordance with Article 17 of that RD. As such it was not a mere administrative registration, but a specific commitment granting rights to the investors.⁵⁶² In its support, the Claimant cites the tribunal in Masdar v. Spain which observed the legal consequence of the registration in RAIPRE as follows⁵⁶³:

“Specifically, the State undertook that it would offer to investors the possibility to continue to enjoy the existing benefits, provided that within a certain window of time, they did everything necessary to enable them to register in the RAIPRE. This was a very specific unilateral offer from the State, which an investor would be deemed to have accepted, once it had fulfilled the substantial condition of construction of the plant and the formal condition of registration within the prescribed “window”.⁵⁶⁴

544. In support of its rejection of the Respondent's contention that the registration in RAIPRE is simply an administrative requirement to sell energy without any further legal consequences, the Claimant also cites the tribunal in Antin v. Spain which stated that the tribunal was “not persuaded that registration in the RAIPRE is simply an administrative requirement to sell energy without any further legal consequences.”⁵⁶⁵

⁵⁶⁰ Certificate of Final Registration in the RAIPRE of Solacor 1 (C-0088); Certificate of Final Registration in the RAIPRE of Solacor 2 (C-0089). ↩
⁵⁶¹ Cl. PHB, para. 9 quoting Mr. Soler Babot's testimony in Tr. Day 3, 25:13-17. ↩
⁵⁶² Tr. Day 1, 43:9-12 ↩
⁵⁶³ Cl. Opening, slide 97. ↩
⁵⁶⁴ Masdar award, para. 512 (CL-0175). ↩
⁵⁶⁵ Cl. Opening, slide 98, citing Antin award, para. 552 (CL-0182); Cl. PHB, para. 9. ↩

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(d) The Claimant's legitimate expectations

545. The Claimant maintains that JGC's investments in the Solacor Plants were attracted by the remuneration regime under RD 661/2007 and Spain's promises and specific assurances of stability thereof as elaborated in detail earlier. The Claimant legitimately believed Spain's commitments and assurances of stability of such remuneration regime.⁵⁶⁶

546. The Claimant submits that it has carried out a detailed due diligence to confirm the stability and guarantees of RF#1. The Claimant claims that the level of the due diligence it conducted satisfies any legal standard.⁵⁶⁷ The due diligence showed that no previous decision by the Spanish Supreme Court could warn JGC that the full abrogation of RF#1 would be legal in Spanish law.⁵⁶⁸ The Claimant asserts that when the Claimant took the investment decision in July 2010, there was no doubt that if the Spanish Government ever adopted a change in the regulatory regime or contravened the specific commitments in RD 661/2007 or the specific agreement of July 2, 2010, it would be compensated.⁵⁶⁹

547. Specifically, the Claimant claims that before making the investment, it conducted an exhaustive due diligence to assess the viability of the projects from all points of view, including seeking the opinion of its Spanish legal counsel on the regulatory framework and meeting with Spanish authorities who provided information about the regulatory framework and the requirements for the projects to benefit from RD 661/2007.⁵⁷⁰ In addition to Claimant's own due diligence, the Lenders also conducted their due diligence and gave green light to commit to finance the construction of the Solacor Plants. Furthermore, referring to the letter written by Mr. Hernandez Garcia, General Director for Energy Policy & Mining of the Ministry of Industry, Tourism and Commerce to the Chairman of NEXI dated on July 30, 2010,⁵⁷¹ the Claimant claims that NEXI gave its Naidaku approval to provide its OULI guarantee after receiving assurances from Spanish

⁵⁶⁶ Tr. Day 1, 25: 5-8; Cl. Mem., para. 527. ↩
⁵⁶⁷ Cl. Opening, slide 85; Tr. Day 1, 38:3-5. ↩
⁵⁶⁸ Cl. PHB., paras. 15 and 30-32. ↩
⁵⁶⁹ Tr. Day 1, 38:9-16. ↩
⁵⁷⁰ See Cl. Reply, paras. 314-329; Cl. PHB., paras. 33-34. ↩
⁵⁷¹ (C-0261) ↩

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authorities.⁵⁷² In its support, the Claimant refers to the testimony of Mr. Endo at the Hearing who stated that:

“...NEXI interpreted this letter as a government-to-government assurance. And so with this letter it decided at that point to enter into the specific procedure of granting the insurance.”⁵⁷³

548. The Claimant claims that the assessment provided by the advisors of JGC and other participants in the transaction including the Lenders underlined that as long as the Solacor Plants were able to get registered in RAIPRE before January 1, 2013, the Solacor Plants would have a right to benefit from the feed-in regime set forth in RD 661/2007 for the entire lifetime of its facilities.⁵⁷⁴ It further claims that none of the due diligence sources consulted by JGC, Abengoa, NEXI or the Lenders identified or forecasted any red flag of a sweeping legislative reform such as the Disputed Measures that Spain passed a few years later. Therefore, the Claimant submits that it could legitimately believe in both the specific assurances the Respondent gave to it and the regulatory framework.⁵⁷⁵

549. Consequently, the Claimant argues that it could legitimately conclude that the Solacor Project's risks would only involve the substantial development and operational risks, including those related to potential cost overruns or engineering-related risks in general, but the regulatory risk would be low.⁵⁷⁶

550. Contrary to the Respondent's argument, the Claimant submits that the Clifford Chance Report rendered for the Lenders in August 2009⁵⁷⁷ supports its right to be compensated and must be read in light of all accumulated assurances from the Spanish Government.⁵⁷⁸ The Claimant claims that there is nothing in the Clifford Chance Report that could question its

⁵⁷² Cl. Opening, slide 62. ↩
⁵⁷³ Tr. Day 2, [Endo] 41:15-21. ↩
⁵⁷⁴ Cl. Reply, para. 328. ↩
⁵⁷⁵ Ibid., para. 329. ↩
⁵⁷⁶ Cl. PHB, para. 32, referring to Mr. Miyamoto's witness statement (CWS-TM), para. 27 and Mr. Miyamoto's testimony at the Hearing; Tr. Day 2, [Miyamoto] 69:4-12 and 84:3-5. ↩
⁵⁷⁷ Clifford Chance Report, August 24, 2009 (C-0574). ↩
⁵⁷⁸ Cl. Opening, slide 86; Tr. Day 1, p. 39:1-6. ↩

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impeccable due diligence.⁵⁷⁹ Specifically, the Claimant quotes the following passages from the conclusion section of the Clifford Chance Report:⁵⁸⁰

“1. It is possible for a reglementary disposition to modify the economic regime established in RD 661/2007 affecting solar thermal plants included in its scope.
2. However, in order for said disposition to be valid, it must respect the following:
a) It cannot retroactively affect the payment of tariffs or premiums corresponding to energy that has already been sold by the owners of a special regime production facility.
b) It cannot infringe the principles of legal certainty and legitimate expectations, taking into account of the following:
- The importance of the modifications introduced.
- The predictability of modifications.
- The existence of exterior signs by the Administration creating the belief that a reglementary change will not take place.
- The existence of sufficient transitory measures or compensatory measures.
c) It has to ensure that the special regime electric energy installations receive reasonable rates of return with regard to the investment costs incurred as established in Law 54/1997." [Emphasis added by the Claimant]

551. Contrary to the Respondent's reading of the Clifford Chance Report to the effect that Clifford Chance advised the Lenders and JGC about the fact that RD 661/2007 could be modified, affecting already existing CSP plants,⁵⁸¹ the Claimant submits that the report established a number of criteria that any change to RD 661/2007 should comply with, like non-retroactivity of dispositions restricting individual rights and the protection of the legal certainty and legitimate expectations, bearing in mind (i) the importance of the modification introduced; (ii) the predictability of the modification; (iii) the existence of exterior signs by the Administration creating the belief that a regulatory change would not take place; and (iv) the existence of sufficient transitory measures or compensatory measures.⁵⁸²

⁵⁷⁹ Tr. Day 6, 32:7-9. ↩
⁵⁸⁰ Cl. Opening, slides 86-87 referring to Clifford Chance Report, August 24, 2009, pp. 26, 28-29 (C-0574). ↩
⁵⁸¹ See Tr. Day 2, 29:24-30:2 [the Respondent's question to Mr. Endo in cross-examination]. ↩
⁵⁸² Cl. Opening, slide 87, referring to Clifford Chance Report, August 24, 2009 (C-0574). ↩

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552. The Claimant specifically refers to the paragraph in the Clifford Chance Report which referred to the existence of exterior signs by the Administration creating the belief mentioned above⁵⁸³. The paragraph reads as follows:

“In the case at hand, said belief could be found on the fact that the Spanish Government, by means of the provisions contained in articles 36 and 44.3 of RD 661/2007, has established a series of tariffs, premiums and supplements to be received during the whole useful life of solar thermal plants for the sale of the electricity they generate. Additionally, notwithstanding the provision of future reviews of said tariffs, article 44.3 of RD 661/2007 expressly states that the reviews of the regulated tariff and the upper and lower limits on the aggregate of the reference market price and the reference premium will not affect those installations that have entered into service prior to January 1 of the second year after the year during which the review has taken place.”

553. The Claimant asserts that the Clifford Chance Report expressly concluded that any regulatory changes to RD 661/2007 had to respect the principles of legal certainty and legitimate expectations to be valid.⁵⁸⁴

554. The Claimant contends that it never understood from the Clifford Chance Report that the Spanish Government would carry out a system overhaul.⁵⁸⁵ In its support, the Claimant refers to Mr. Endo's testimony at the Hearing in response to the Respondent's counsel asking him whether JGC was aware of the fact that, in addition to the revisions included in Article 44 of RD 661/2007, the Government could modify RD 661/2007. Mr. Endo answered as follows:

“I have no understanding that there is a complete overhaul of the system itself. But at the same time, as stated in this conclusion, I thought that there is at any time a possibility of adjustment within the reasonable scope. But that adjustment within the reasonable scope is a completely different matter to a complete system overhaul."⁵⁸⁶

555. The Claimant further quotes⁵⁸⁷ the following testimony of Mr. Endo referring to the conclusion of the Clifford Chance Report:

⁵⁸³ Cl. Opening, slide 88, quoting from Clifford Chance Report, August 24, 2009, p. 26 (C-0574); Tr. Day 1, 40:13- 41:10. ↩
⁵⁸⁴ Tr. Day 6, 31:23-25; Cl. PHB, para. 37. ↩
⁵⁸⁵ Cl. Closing, slide 66. ↩
⁵⁸⁶ Tr, Day 2, [Endo] 29:6-12. ↩
⁵⁸⁷ Cl. PHB, para. 65. ↩

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“I believe that the agreement between the industry association and the minister, reached in July 2010, was done in line with the procedure mentioned in this conclusion. And following that procedure, a minor change was made. That was my understanding."⁵⁸⁸

556. The Claimant points out that in addition to Lenders, NEXI also became comfortable with the stability of the regulatory framework through its extensive due diligence and after receipt of the letter from the Spanish Government's representative and accordingly provided its OULI guarantee.⁵⁸⁹

557. In response to the Respondent's argument that some of the documents the Claimant relied on in forming legitimate expectations post-dated its investment date, the Claimant contends that although they post-dated the investment date, their main contents were announced at, and formed part of, the July 2, 2010 Agreement, which pre-dated its investment date. Moreover, JGC continued deepening its investment in the Solacor Project by disbursing its EUR 34 million equity investment pursuant to the capital increases of the Solacor SPVs from September 2010 until March 2012 as required by the Senior Loans drawdowns and the Shareholders' Agreements well after RD 1614/2010 and the Acceptance Letters.⁵⁹⁰

558. The Claimant argues that the Spanish Supreme Court decisions on which the Respondent relies are irrelevant to assess the Claimant's legitimate expectations.⁵⁹¹ In the Claimant's view, as the investor's legitimate expectations must be assessed at the time of its investment, the Supreme Court judgments rendered after August 6, 2010 (date of JGC's investment) could not have informed the Claimant's expectations created under RD 661/2007, confirmed under the July 2, 2010 Agreement and reinforced with ad hoc representations (including the comfort letter to NEXI).⁵⁹²

559. The Claimant states that each and every judgement of the Supreme Court on renewable energy before the investment date (which in total were seven cases)⁵⁹³ do not support Spain's contention that JGC should have been aware that the Government could make

⁵⁸⁸ Tr. Day 2, [Endo] 30:21-25. ↩
⁵⁸⁹ Cl. Opening, slide 89-90; Tr. Day 1, 42:3-43:2. ↩
⁵⁹⁰ Cl. PHB, para. 130. ↩
⁵⁹¹ Cl. PHB, para. 60. ↩
⁵⁹² Cl. PHB, para 61. ↩
⁵⁹³ Tr. Day 6, 20:23–21:3. ↩

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sweeping changes to RF#1 such as the Disputed Measures.⁵⁹⁴ The Claimant asserts that the judgements issued in 2005-2007⁵⁹⁵ did not deal with RD 661/2007, but with different regulations not applicable to this case and that two Supreme Court judgements rendered in 2009 ⁵⁹⁶ dealt with RD 661/2007, but are irrelevant to assess JGC's legitimate expectations.⁵⁹⁷ The Claimant elaborates that the December 3, 2009 judgment (R-0123) rejected a challenge to the validity of RD 661/2007 that a PV company had brought against RD 661/2007 on the grounds that PV installations were not included in its transitory provisions. The judgment dismissed the challenge holding that the remuneration provided by RD 436/2004 was in essence the same as the one laid down in RD 661/2007 for PV facilities.⁵⁹⁸ The December 9, 2009 judgment (R-0002) dismissed a challenge brought by an owner of cogeneration facilities because the claimant had failed to prove that it would have invested under RD 436/2004.⁵⁹⁹

560. Citing Mr. Montoya's testimony at the Hearing,⁶⁰⁰ the Claimant further contends that neither Mr. Montoya nor the Spanish agencies explained any Supreme Court case decision to potential investors attracted by the Spanish regulatory framework.⁶⁰¹

561. With respect to the Spanish proceedings brought by the Solacor SPVs against MO IET/1045/2014, the Claimant explains that the Solacor SPVs were not seeking compensation in this Spanish administrative court proceedings. The relief was limited to challenge the legality or the validity of a ministerial order against Royal Decree 413/2014 and EPA 2013. The decision of the Supreme Court was that the ministerial order was not illegal because it complied with the requirements of the Electricity Act.⁶⁰²

⁵⁹⁴ Cl. PHB, para. 62. ↩
⁵⁹⁵ Judgment of the Third Chamber of the Supreme Court, December 15, 2005 (R-0119); Judgment of the Third Chamber of the Supreme Court, October 25, 2006, RCA 12/2005, reference El Derecho EDJ 2006/282164 (R-0120); Judgment of the Supreme Court, March 20, 2007, 11/2005 EDJ 2007/18059 (R-0121); and Judgment of the Supreme Court, October 9, 2007 13/2006 EDJ 2007/175313 (R-0122). ↩
⁵⁹⁶ Judgment of the Supreme Court, December 3, 2009, Appeal 151/2007 EDJ 2009/307349 (R-0123) and Judgment of the Third Chamber of the Supreme Court, December 9, 2009, appeal 152/2007, reference El Derecho EDJ 2009/307357 (R-0002). ↩
⁵⁹⁷ See Cl. Closing, slide 39; Tr. Day 6, 21:8-25. ↩
⁵⁹⁸ Tr. Day 6, 21:8-22:4; Cl. PHB, para. 62; Cl. Closing, slide 39. ↩
⁵⁹⁹ Tr. Day 6, 22:5-9; Cl. PHB, para. 62; Cl. Closing, slide 39. ↩
⁶⁰⁰ Tr. Day 3, [Montoya] 50:10-13. ↩
⁶⁰¹ Cl. PHB, para. 62(iii). ↩
⁶⁰² Tr. Day 6, 20:2-16; Cl. Closing, slide 37. ↩

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(e) Disputed Measures:

562. The Claimant submits that the Respondent breached its specific assurances of stability when it replaced the Special Regime of RD 661/2007 (as amended by RD 1614/2010) with a fundamentally different regulatory framework, i.e., the Disputed Measures.⁶⁰³ As stated earlier, the Claimant claims that the Disputed Measures changed the essential characteristics of the remuneration scheme relied upon by it at the time of its investment and thus constituted a breach of Article 10(1) of the ECT.⁶⁰⁴ The Claimant calls the change introduced by the Disputed Measures a “paradigm change”.⁶⁰⁵

(i) Law 15/2012 and RD-L 2/2013 (RF#2)

563. The Claimant submits that Law 15/2012 abrogated the right to use natural gas as a backup fuel, which was one of the essential characteristics of the original regime under RD 661/2007 and one of the essential characteristics in the July 2, 2010 Agreement.⁶⁰⁶ The Claimant argues that RF#1 incentivized electricity production with natural gas in a consistent manner, referring to Article 2(1)(b)(b)(1) of RD 2818/1998, Article 2(1)(b)(b)(1) of RD 436/2004, Articles 2(1)(b)(1), 17(b) and 36 of RD 661/2007.⁶⁰⁷ Moreover, the Claimant asserts that this element derived from the Government's representation under point 1 of the July 2, 2010 Agreement with the Thermosolar Sector (the one-year suspension of the FiP option with an increase to 15% of natural gas production instead of the 12% limit per RD 661/2007).⁶⁰⁸ The Claimant states that the use of gas up to 15% rather 12% was defined as quid pro quo for the one year suspension by the Masdar tribunal.⁶⁰⁹ The Claimant contends that a reduction of gas allowance was not foreseeable.⁶¹⁰ The Claimant claims that if Spain had applied ex ante a remuneration scheme that did not provide incentives for the use of natural gas, JGC would have avoided

⁶⁰³ Cl. PHB, Section II.C. ↩
⁶⁰⁴ The Claimant focused on the obligation to provide stability and the FET and to the protection of legitimate expectations during its opening statement at the Hearing. The Claimant explained that it was not waiving other causes of action claimed in the written submissions. Tr. Day 1, 69:1-14; Cl. Opening, slides 156-166. ↩
⁶⁰⁵ Tr. Day 1, 68:23. ↩
⁶⁰⁶ Tr. Day 1, 69:18-70:1. ↩
⁶⁰⁷ Cl. PHB, para. 90. ↩
⁶⁰⁸ Cl. PHB, para. 91 referring to the email from Mr. Antonio Hernández García to Dr. Luis Crespo of July 8, 2010 (C-0219t). ↩
⁶⁰⁹ Id., referring to Masdar Award, para. 120 (CL-0175). ↩
⁶¹⁰ Id. ↩

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investing in gas-burning equipment or investing in the Solacor Project at all.⁶¹¹ Referring to the Note on the legal and economic impact of the bill of Law 15/2012 submitted to the Respondent's Parliament on September 20, 2012,⁶¹² the Claimant asserts that the economic impact of the non-use of backup fuel would entail a reduction of 12% in the total remuneration.⁶¹³

564. The Claimant also states that RD-L 2/2013 in effect eliminated the premium (FiP) option, one of the essential characteristics of the original regime in RF#1, and substituted CPI by IPD-IP in the annual adjustment of tariffs, premiums and the upper and lower limits. The Claimant submits that the FiP option was an essential driver for all CSP investors including JGC and that the right to choose between the FiP and FiT options shaped JGC's expectations. In accordance with the July 2, 2010 Agreement, Article 3 of RD 1614/2010 and the Offering and Acceptance Letters, the Claimant expected that in the first quarter of 2013, after the first year of operation under the FiT option, the Solacor Plants could then switch to the FiP option, as foreseen in RD 661/2007 and RD 1614/2010.⁶¹⁴ The Claimant refers to the testimony of Mr. Miyamoto at the Hearing who stated that “in making decisions on this investment as a factor to calculate, we used feed-in premium”⁶¹⁵ and “Solacor entities, namely JGC and Abengoa, also used FIP.”⁶¹⁶ The Claimant argues that both Abengoa and the Claimant as co-owners of the Solacor Plants thought that pool plus premium was the best option under RD 661/2007 for the production of energy since 2009.⁶¹⁷ The Claimant contends that the abrogation of the FiP option was not foreseeable at all.⁶¹⁸ Accordingly the elimination of a mixed FiP/FiT regime breached JGC's expectations, particularly under point 1 of the Respondent's agreement with the Thermosolar Sector.⁶¹⁹

⁶¹¹ C1. PHB, para. 89. ↩
⁶¹² (C-0375t) ↩
⁶¹³ See Cl. Mem, paras 630-646. This measure was subject to a specific development by the Respondent in a subsequent ministerial order. First Final Provision, Law 15/2012 (C-0372/C-0372t). ↩
⁶¹⁴ Ibid., para. 93. ↩
⁶¹⁵ Tr. Day 2, [Miyamoto] 82:6-8. ↩
⁶¹⁶ Ibid., [Miyamoto] 82:16. ↩
⁶¹⁷ Cl. Mem, para 674. ↩
⁶¹⁸ Cl. PHB, para. 94. ↩
⁶¹⁹ Ibid., para. 97, referring to (C-0219). ↩

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565. The Claimant disagrees with the Respondent's argument that there have been several changes over time from one royal decree to the following to affirm the validity and foreseeability of the abrogation of CPI as the updating index. The Claimant submits that the Acceptance Letters sent by the Ministry of Energy to Solacor SPVs⁶²⁰ clearly guaranteed the Solacor Plants' right of annual updates of the values of Article 36 of RD 661/2007 according to CPI. The Claimant points out that the Respondent duly updated the values of tariffs, premiums and caps and floors by ministerial orders between 2007 and 2012 in accordance with Article 44(1) and First Additional Provision of RD 661/2007.⁶²¹ The Claimant claims that the replacement of CPI with IPD-IP to deliberately reduce the remuneration under RD 661/2007 entailed a serious decrease in the updating rate, and thus was a clear repeal of the original regimes' method of updates of the tariff, premiums and caps and floors.⁶²² The Claimant submits that the elimination of annual updates under CPI is, consequently, a breach of JGC's expectations under RF#1.⁶²³

566. The Claimant claims that due to RF#2, it had already suffered huge damages.⁶²⁴ In the Claimant's view, RF#2 was phased out by a new normative context, which was basically a change of system, RF#3.⁶²⁵

(ii) RD-L 9/2013, Law 24/2013, RD 413/2014 and implementing Ministerial Orders including MO IET/1045/2014 (RF#3)

567. The Claimant submits that in July 2013, the Respondent enacted RD-L 9/2013, which repealed RD 661/2007 as well as any other conflicting laws and regulations and introduced a new model that was based on entirely different regulatory premises, but yet “under construction". Law 24/2013 followed in December, 2013. In June 2014, the Respondent approved RD 413/2014⁶²⁶ and MO IET/1045/2014⁶²⁷ which defined economic parameters of its new regime, specifically designed to cut the remuneration of existing renewable

⁶²⁰ (C-0295) and (C-0297) ↩
⁶²¹ Cl. Mem. paras. 271-273. ↩
⁶²² Cl. Mem, para. 679. ↩
⁶²³ Cl. PHB., para. 44. ↩
⁶²⁴ Cl. Mem, para. 685. ↩
⁶²⁵ Tr. Day 6, 27:14-16; Cl. PHB, paras. 151 and 170. ↩
⁶²⁶ RD 413/2014, June 6, 2014 (C-0388). ↩
⁶²⁷ Ministerial Order IET/1045/2014, of June 16, 2014 (C-0383t). ↩

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installations. In October 2014, the Respondent approved MO IET/1882/2014⁶²⁸ to set out the new conditions for the use of natural gas by CSP plants.⁶²⁹

568. The Claimant considers that it is a total change of the system. In the Claimant's view, this unprecedented new model, based on the concept of standard installations, is not a feed-in system anymore, and no longer guarantees a stable remuneration. The Claimant points out that CNE in its Report 18/2013⁶³⁰ stated that there was no comparable remuneration system in the EU.⁶³¹ It drastically reduced the returns of the Solacor Plants.⁶³² The Claimant submits that the new remuneration model has eliminated all essential characteristics of the remuneration model that was in effect at the time of the Claimant's investment.⁶³³

569. The Claimant asserts that while RD 661/2007 remunerated actual production by applying a price expressed in €/MWh to a CSP installation's production of electricity, the new remuneration system remunerates installed capacity by reference to “Installations-Type" or “IT”.⁶³⁴ Pointing out that Article 36 of RD 661/2007 or any other provisions of RD 661/2007 did not have any reference to “standard installation” or “installation type (IT)”, the Claimant states that the standard facility installation type is a novel regulatory concept around which the new system revolves.⁶³⁵ In this regard, the Claimant contends that there is no parallelism between the 2005-2010 Plan's ‘case type' and the ‘installation type' concept set out in RD 413/2014 and MO IET/1045/2014.⁶³⁶ The Claimant further contends that because the remuneration is established by reference to one hypothetical installation type (IT), the remuneration does not correspond with the actual CAPEX of the Solacor Plants. The Claimant submits that EUR 4.576 million per MW, the investment costs attributed to all IT-00604 plants (to which category the Solacor Plants belong), is

⁶²⁸ Ministerial Order IET/1882/2014, of October 14, 2014 (C-0376). ↩
⁶²⁹ Cl. PHB, para. 67. ↩
⁶³⁰ Report 18/2013 on the new RD on renewable energy production, issued by the CNE on September 4, 2013, p. 5 (C-0408t). ↩
⁶³¹ Cl. PHB., para. 69. ↩
⁶³² Tr. Day 6, 34:21-35:1. ↩
⁶³³ See Cl. Opening, slide 180, offering detailed comparison of the remuneration system under RD 661/2007 as modified by RD 1614/2010 and the new model introduced by the Disputed Measures; Cl. PHB, para. 68. ↩
⁶³⁴ Cl. PHB, para. 70. ↩
⁶³⁵ Ibid., para. 70-71. ↩
⁶³⁶ Ibid., para. 75. ↩

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"substantially below the actual average investment costs of all these plants, the IT- 00604".⁶³⁷

570. The Claimant further criticizes the new system in that it sets a maximum target return and introduces a novel concept of “regulatory useful life”, all these with retrospective effect.⁶³⁸ The Claimant argues that RF#1 neither guaranteed any rate of return or established any maximum rate of returns capping the remuneration of renewable installations (there were just FiP and FiT options), but the new remuneration model establishes caps to ensure that an existing CSP installation will not exceed what the Respondent considers a maximum rate of return in 2014. Once the installation reaches this “target” rate of return, it is no longer entitled to any incentive and it must sell its production at the market price. Moreover, Article 19 of RD 413/2014 entitles the Respondent to discretionally change the remuneration rate of existing CSP plants at the end of each regulatory period (i.e., six years with adjustments every three years). In the first regulatory period, the Respondent has used the 10-year Spanish bond plus a 300-basis-point spread as proxy for establishing an ex post rate of return (7.398%). The Claimant asserts that the economic rationale for establishing this remunerative approach as well as the methodology for updating the spread in the future is not clear. Thus, in the Claimant's view, the new regulatory regime creates regulatory uncertainty.⁶³⁹

571. The Claimant submits that the most unfair element of the new system is that the Government is imposing an arbitrary 7.4% (7.398%) pre-tax return on existing profits, which is clearly lower than the 7% to 11% post-tax returns that the Government promised while Royal Decree 661 was in place.⁶⁴⁰ In this regard, the Claimant submits that a fair return is what the Government said was fair in its regulations at the time of the investment.⁶⁴¹ In this regard, the Claimant maintains that the expected returns JGC

⁶³⁷ Ibid., para. 76, quoting to the testimony of Mr. Garcia, Tr. Day 4 [García] 206:8-10. ↩
⁶³⁸ Ibid., para. 70. ↩
⁶³⁹ Ibid., paras. 78-79. ↩
⁶⁴⁰ Tr. Day 6, 36:2-7. ↩
⁶⁴¹ Ibid., 36:15-16. ↩

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expected to receive were “the expected returns based on RD 661 that we expected at the time of making the decisions to invest in this project.”⁶⁴²

572. The Claimant also asserts that the application of the new remuneration system to existing CSP installations is retroactive. The Claimant points out that in September 2013, the CNE raised serious concerns about the “great uncertainties” created to existing projects by the new standard installation system.⁶⁴³ The Claimant states that the replacement of a remuneration system based on production with a new one based on investment costs brought extremely unfair consequences to the Claimant's investment.⁶⁴⁴ The Claimant explains the problem of the new remuneration system in the following words:

"If you build an installation with an investment base higher than the investment base of your assigned standard installation that the government has calculated ex- post, you have been basically fooled by the regulator, because the incentive will not be enough to recover your initial capital expense and earn a fair return.”⁶⁴⁵

573. The Claimant contends that while one of the key defences of the Respondent is to try to portray that the new remuneration model introduced by the Disputed Measures is the same model as the previous one, this is wrong.⁶⁴⁶ The Claimant submits that the differences between the original regime and the new regime under the Disputed Measures are as follows:

1. Under the Special Regime of RD 661/2007 as modified by RD 1614/2014, fixed single value applied to the entire production and applied during the entire installations' lifetime beyond 25 years. It is a performance-based incentive in that the more you produce, the more you earn. No cap is applicable on the remuneration amount. Thus, the clarity of the rules of remuneration helped the investors to plan the investment.⁶⁴⁷ There would not be a retroactive change of remuneration to existing plants (grandfathering clause). Use of LNG as back-up fuel up to 15%/12%

⁶⁴² Cl. PHB, para. 85, quoting Mr. Miyamoto's testimony, Tr. Day 2, 80:4-6. ↩
⁶⁴³ Report 18/2013 on the new RD on renewable energy production, issued by the CNE on September 4, 2013 (C-0408t). ↩
⁶⁴⁴ Cl. PHB, para. 86. ↩
⁶⁴⁵ Tr. Day 6, 35:11-17. ↩
⁶⁴⁶ Tr. Day 1, 77:8-16. ↩
⁶⁴⁷ Cl. Mem., paras. 257-262. ↩

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was allowed to enhance generation efficiency. Annual adjustment to remuneration was made with general CPI. CSP plants had a right to select FiT or FiP.

2. Under the new model defined by MO 1045/2014 in detail, the investor no longer receives a fixed price for kilowatts produced. Under the new model, the Government assigns a standard installation code to each operating installation. Remuneration is composed of two elements: return on investment and return on operation. Main term is a capacity payment incentive and is not remunerating production. The remuneration is capped at 7.398% pre-tax of return on investment of "standard installation" and the cap would be set by the Respondent based on a “dynamic reasonable rate of return”. The remuneration is limited by the regulatory useful life of 25 years. Remuneration parameters determining the specific remuneration are set by the Government at its discretion using hypothetical conditions of “standard plants”. The discretion of the Government in setting remuneration parameters means regulatory risk for existing investments. Thus, under this new model, incentives are diminished in value and not predictable.⁶⁴⁸ Use of LNG back-up is allowed only for minimum necessity (almost zero). Adjustment of remuneration may happen, but no clear index is set. The producers do not have option on remuneration scheme (FiT or FiP).

574. The Claimant denies the Respondent's arguments (see para. 711 infra)⁶⁴⁹ that documents contemporary to the Claimant's investment reveal JGC's understanding and expectation of a probable change in the regulatory framework applicable to the Solacor Project.⁶⁵⁰ The Claimant contends that none of the documents cited by the Respondent demonstrate that JGC was aware of Spain's intention to completely replace the remuneration regime in an unreasonable, arbitrary, disproportionate and non-transparent manner.⁶⁵¹

575. The Claimant explains that the clauses referring to a change in law in the Loan Agreements and EPC Contracts are standard clauses and could not be used as an indication that the

⁶⁴⁸ Cl. Opening, slides 179-180. ↩
⁶⁴⁹ Resp. Opening, slides 123-130. ↩
⁶⁵⁰ Cl. PHB, para. 109. ↩
⁶⁵¹ Cl. Reply Section V.2.2.3.4, paras. 360-392. ↩

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Claimant foresaw the possibility of such change in law. They are without prejudice to any claim by an investor against the host State under domestic or international law as a consequence of the said change in law.⁶⁵²

576. With respect to the Respondent's argument that NEXI was aware that the remuneration regime for the Solacor Plants could change (see para. 712 infra), the Claimant contends that the fact NEXI issued the OULI is the living proof that it had not identified any probable change to RF#1.⁶⁵³

577. The Claimant brings to the attention of the Tribunal the fact that BCG and RB were requested to provide assistance in case of future arbitration proceedings against the Respondent after the approval of MO IET/1045/2014.⁶⁵⁴

(f) The Claimant's rebuttal to the Respondent's tariff deficit and reasonable rate of return arguments

578. The Claimant contends that the defences that the Respondent submits in this arbitration are exactly the same defences based on the tariff deficit and the reasonable rate of return arguments which it has already tried in other cases and have failed. Specifically, the Clamant notes that in previous cases such as Antin, Masdar and Eiser tribunals have rejected these lines of the Respondent's defence.⁶⁵⁵

579. As the Claimant understands it, the Respondent's defence in principle is that an investor is to receive a reasonable rate of return that the Government determines and could change in the future in accordance with the cost of money on capital markets. This defence is built upon the legal tenet of hierarchy of rules in that a royal decree has a lower rank than a law such as EPA 1997 or EPA 2013, and therefore the Government could amend royal decrees by laws with a higher rank. The Claimant asserts that the principle of hierarchy invoked by Spain could not replace the test whether or not a new regulatory regime has changed essential characteristics of the original remuneration regime in breach of its international obligation under the ECT. The Claimant asserts that if the Government were to be able to

⁶⁵² Cl. PHB, para. 102. ↩
⁶⁵³ Ibid., para. 103. ↩
⁶⁵⁴ Ibid., para. 106, referring to IDAE's Technical Terms & Conditions (C-0645). ↩
⁶⁵⁵ Tr. Day 1, 71:17-23. ↩

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change the rules of the game, and to provide different contents of rates of return in different years after the investment has been made, investors would never choose to make an investment. The Claimant asserts that investors need to know beforehand the rules that will determine the remuneration.⁶⁵⁶ It further submits that the Government can choose to set the model it chooses such as a model including a revision every certain years of time. However, the Claimant contends, once the Government has decided to put in place a model based on remuneration based on production, and investors have made the investment, what is against the ECT is to accept a proposition that would allow the Government to change essential characteristics of the original regime under which the investors have made their investment.⁶⁵⁷

580. The Claimant labels as “dynamic return fallacy”⁶⁵⁸ the Respondent's argument that the remuneration model derived from Law 54/1997 “guaranteed its dynamism through the principle of regulatory hierarchy" and "[t]he way in which dynamism was expressed was via regulatory modification and that these regulatory reforms allow the regulations to be adapted to the changing economic and social circumstances without affecting the basic rules contained in the Law."⁶⁵⁹

581. Citing Eiser v. Spain award⁶⁶⁰, the Claimant points out that according to the Ministry of Industry, Energy and Tourism, RD 661/2007 was structured to provide substantially higher after-tax returns than that of the new model to successful CSP investors.⁶⁶¹

582. The Claimant argues that the Spanish Government found reasonable to reach rates of return of up to 11% after tax under RD 661/2007.⁶⁶² It cites a press release of the Ministry of Industry, issued on November 28, 2006, which included a statement that “in the case of technologies requiring a boost because of their limited development such as biomass, biogas and solar thermal, the return is increase to 8% for the regulated tariff option and

⁶⁵⁶ Tr. Day 1, 78:20–79:1. ↩
⁶⁵⁷ Tr. Day 1, 79:7-15 ↩
⁶⁵⁸ Cl. Opening, slide 168. ↩
⁶⁵⁹ Resp. Rej, para. 1259. ↩
⁶⁶⁰ Eiser Award, para. 392 (CL-0149). ↩
⁶⁶¹ Cl. Opening, slide 170; Tr. Day 1, 79:16-20. ↩
⁶⁶² Tr. Day 1, 81:3-7; Cl. Opening, slide 171. ↩

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between 7% and 11% when participating in the market.”⁶⁶³ The Claimant points to another document of the Ministry titled as “Project Memorandum of Royal Decree”⁶⁶⁴, which stated that "the proposed regulated tariff value under RD 661/2007 for CSP sector provides a return (IRR in current currency, with own resources after taxes and at 25 years) of 8%” and “for the market option, a premium that ensures a project IRR of 9.5% for the type case at 25 years with a minimum of 7.6% and a maximum of 11%.”

583. In contrast, Spain's new regulatory regime deemed the reasonable rate of return to be a pre-tax return of 7.398% on the hypothetical asset value of a hypothetical “efficient” plant, and this equates to 5.2% after tax on the hypothetical asset base for the investor in the Eiser case according to the Eiser tribunal.⁶⁶⁵ The Claimant submits that the IRR of the Solacor Plants after the Disputed Measures renders 4.3% after tax.⁶⁶⁶ The Claimant asserts that this change in the concept of reasonability is significant and thus it is not acceptable that after the investment and after the investor accepted the proposition from the Government in 2007, the Government decided that “today it's not reasonable to accept what they themselves deemed reasonable in 2007.”⁶⁶⁷ The Claimant points out that no argument was advanced by the Respondent proposing that RD 661/2007 goes against the EPA 1997.⁶⁶⁸

584. According to the revised Spanish model, adopted in and after 2013, the Claimant argues, the amount of remuneration would be left to arbitrary decisions by Spain, and the special payment would be limited, contrary to Spain's commitments, thus the new model is arbitrary. In support of its argument, the Claimant cites the following words of the Antin tribunal:

“Based on the evidence on the record of this arbitration, the Tribunal concludes that the methodology for determining the “reasonable rate of return” under the New Regime is not based on any identifiable criteria. On the contrary, what Spain

⁶⁶³ Official Press Release of the Ministry of Industry, Tourism and Commerce of November 28, 2006, “The Ministry of Industry assigns priority to profitability and stability in the new regime for assistance for renewable energy and cogeneration" (C-0074/C-0074t). ↩
⁶⁶⁴ Project Memorandum on Royal Decree by Regulating the Activity of Energy Production in Special Regime and of certain Facilities of Assimilable Technologies, of Ordinary Regime, the General Directorate of Energy Policies and Mining, March 21, 2007 (C-0662/0662t). ↩
⁶⁶⁵ Cl. Opening, slide 170 referring to Eiser Award, para. 392 (CL-0149); Tr. Day 1, 80:1-6. ↩
⁶⁶⁶ Tr. Day 1, 81:9-11. ↩
⁶⁶⁷ Ibid., 81:11-19. ↩
⁶⁶⁸ Ibid., 81:20-25. ↩

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labels a “reasonable rate of return” seemingly depends on governmental discretion. "⁶⁶⁹

585. The Claimant states that the best evidence of a paradigm change is the economic impact of the Disputed Measures. It claims that passing from a performance-based model to a capacity investment model has very detrimental consequences and damages for the investors.⁶⁷⁰

586. On the basis of the impact of the new model on the cash flows and the equity value, the Claimant refutes the Respondent's claim that the new model retains the same structure as the original regime.⁶⁷¹ Relying on Compass Lexecon's report, the Claimant contends that the new model has reduced the incentives to CSP plants, and as a result the Disputed Measures have caused 37% cash flow drop and 43% revenue drop over the lifetime of the Solacor Plants and 70-73% drop in equity value of the Solacor Plants.⁶⁷² The Claimant also claims that the Disputed Measures have caused a 43% revenue drop over the lifetime of the Solacor Plants.⁶⁷³

587. Another argument of the Claimant against the Respondent's defence relates to the concept of standard installation types in the new model. The Claimant argues that the reference to a “type case” in the 2005-2010 Plan, whose purpose was to estimate the funding that Spain needed to achieve renewable growth objective, has nothing to do with the concept of “installation type” under the new model.⁶⁷⁴

588. With respect to the Respondent's defence related to the macroeconomic issues, i. e. the need to address the structural problem of tariff deficit threatening the financial stability of the Spanish electricity system, the Claimant contends that there is no correlation between the tariff deficit and CSP installations or at least the CSP sector was not creating any tariff deficit.⁶⁷⁵ The Claimant does not agree that the incentives to CSP installations were the underlying cause of the tariff deficit. The Claimant points out that the tariff deficit existed

⁶⁶⁹ Cl. Opening, slide 172, citing Antin Award, para. 568 (CL-0182). ↩
⁶⁷⁰ Tr. Day 1, 85:14-20. ↩
⁶⁷¹ Resp. Rej., para. 1280. ↩
⁶⁷² Cl. Opening, slides 175-176. ↩
⁶⁷³ Ibid., slide 186, citing (CER-0002) Compass Lexecon's Valuation Model (CLEX-199), from Tab FCFF&FCFE. ↩
⁶⁷⁴ Tr. Day 1, 84:24-85:10; Cl. Opening, slide 183; See also Cl. Reply, paras. 145-149. ↩
⁶⁷⁵ Tr. Day 1 87:4-12; Cl. Opening, slide, 191. ↩

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as early as in 2005, well before 2007, when there was just an 11-MW CSP plant in operation in Spain.⁶⁷⁶

589. In this regard, the Claimant contends that in spite of the tariff deficit, the Respondent kept promoting the construction and commissioning of CSP installations to become the world's leader in this technology.⁶⁷⁷ The Claimant refers to the testimony of Mr. Caravantes who stated at the Hearing that “in 2013 in the entire world there were probably around 3,000 megawatts of CSP installed capacity, 2,400 of which were in Spain”.⁶⁷⁸ The Claimant argues that Spain is accountable for the tariff deficit because it refused to set up tariffs that would reflect the cost of electricity and, at the same time, largely increased the installed capacity of renewables in Spain.⁶⁷⁹

590. The tariff deficit could not, in the Claimants' view, justify the Disputed Measures, as it was a consequence of Spain's decision to expand capacity of production of renewables and to attract new investments by offering additional incentives. The Claimant points out that the Fifth transitory provision of RD-L 6/2009 provided that if pre-registered projects exceed wind and CSP targets, the Government could restrict access to RD 661/2007. However, instead of limiting access to RD 661/2007, the Government through the resolution of November 13, 2009 accepted pre-registered projects beyond the target set by RD 661/2007 and established the order of priority. The Claimant submits that Spain decided to give priority to attract investment and exceed its capacity targets for CSP and establish new targets knowing the existence of the tariff deficit and knowing that electricity demand had been falling since 2007.⁶⁸⁰ In this regard, the Claimant quotes the following words from the Report by Secretary of State for Energy of November 12, 2009 as the reasons behind such decision-making:

“……… renewable energy provides several beneficial effects that justify public backing. A non-exhaustive list of said benefits includes sustainability of sources, reduction in harmful emissions, technological changes … less energy dependency and

⁶⁷⁶ Cl. PHB, para. 114. ↩
⁶⁷⁷ Ibid., para. 115. ↩
⁶⁷⁸ Tr. Day 3 [Caravantes] 108:2-5. ↩
⁶⁷⁹ Cl. PHB, para. 116. ↩
⁶⁸⁰ Tr. Day 1, 87:13-20; Cl. Opening, slide 193. ↩

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additional social benefits deriving from a lower trade balance deficit, increased employment and rural development."
“... because the benefits indicated above, which far exceed the costs and therefore justify a regulatory framework to support the use of renewable energy...”⁶⁸¹

591. With respect to the Respondent's defence of the Disputed Measures based on the argument of avoidance of “over-remuneration”, the Claimant contends that JGC's investment has not obtained any windfall profit or over-remuneration at the expense of Spanish consumers. It states that the Solacor Plants meant to keep the efficiency gain allowed under RD 661/2007. The Claimant states that the Solacor Plants came into operation in 2012, and thus had barely received any remuneration when cuts were implemented.⁶⁸² The Claimant further contends that in the case of CSP technology and specifically the Solacor Project, there was not any over-remuneration. The Solacor Plants were never allowed to benefit from the FiP option, and they enjoyed the FiT option for less than one year when the Disputed Measures went into effect.⁶⁸³

592. The Claimant submits that if Spain wanted to rely on its economic hardships to preclude the wrongfulness of its actions, it should have made a straightforward state of necessity defence under the ILC Draft Articles on State Responsibility. But as Spain knows that the threshold to meet a state of necessity defence is very high, it instead argues that the Disputed Measures have been proportional.⁶⁸⁴ In the Claimant's view, the Respondent has the burden of proving this claim, and it has clearly failed to do so. The Respondent has provided no evidence demonstrating that the tariff deficit made it impossible to comply with Article 10(1) of ECT. The Claimant argues that the Respondent could have adopted other alternative measures such as electricity price increase for residential and industrial customers and indirect tax increase.⁶⁸⁵ Relying on Dr. Padilla's view, the Claimant maintained in its closing submission at the final day of the Hearing that there were

⁶⁸¹ Cl. Opening, slide 193, citing Report on the Economic Impact of the Entry into Operation of Electric Power Production Facilities Using Renewable Sources of Energy, p. 6 (C-0136t). ↩
⁶⁸² Cl. Opening, slide 194. ↩
⁶⁸³ Id.; Cl. PHB, para 112(iv). ↩
⁶⁸⁴ Tr. Day 6, 37:15-24. ↩
⁶⁸⁵ Tr. Day 1, 88:23-25. ↩

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alternative measures that would have enabled Spain to address the tariff deficit and at the same time comply with Article 10(1) of ECT with very limited distortion.⁶⁸⁶

593. The Claimant submits that the Respondent passed the Disputed Measures to tackle the tariff deficit. However, the Disputed Measures were not the least restrictive measure available to Spain to achieve its objective,⁶⁸⁷ and it did so in a manner that disregarded the tremendous damage inflicted on the Claimant.⁶⁸⁸

594. Finally, the Claimant argues that Spain's reference to the concept of state aid under European law could not justify its breach of Article 10(1) of the ECT. The Claimant rebuts this defence on two grounds. First, the Claimant submits that this Tribunal is not asked to rule on the existence of state aid under EU law. Secondly, the Claimant states that in a case between a Japanese investor and the Kingdom of Spain under the ECT, EU law is a domestic law, not international law, and as such is simply a fact. Accordingly, the only question would be to establish whether or not at the time of investment there was any duty for the investor, or the investor to have expected that EU law would limit its right under the Spanish regulatory framework. The Claimant further submits that its investment was not based on the expectation generated by EU law. The Claimant maintains that the answer to this question is negative because at the time of the Claimant's investment in 2010, neither the Respondent nor the European Commission considered that the support scheme in the RD 661/2007 regime constituted state aid.⁶⁸⁹ Thus, the Respondent believed that the FiT/FiP system were not “aid" and did not have to notify it to the European Commission.⁶⁹⁰ In reliance upon the position taken by the tribunal in Micula v. Romania, the Claimant asserts that at the time of investment in 2010, it was entitled to believe that the Kingdom of Spain was in compliance with EU law.⁶⁹¹

595. The Claimant contends that the EC's State Aid Decision of 2017 cited by the Respondent is irrelevant to the determination of the Respondent's liability in this arbitration. The EC's

⁶⁸⁶ Tr. Day 6, 37:25-38:8. ↩
⁶⁸⁷ Cl. Mem., paras 439-444; Cl. PHB, para. 136. ↩
⁶⁸⁸ Cl. Mem., paras 445-446; Cl. PHB, paras. 133, 137-138. ↩
⁶⁸⁹ Tr. Day 1, 89:17–90:15. ↩
⁶⁹⁰ Cl. Closing, slide 33. ↩
⁶⁹¹ Cl. Opening, slide 202, citing Ioan Micula, Viorel Micula and others v. Romania, ICSID Case No. ARB/05/20, Award, December 11, 2013, para. 706 (CL-103) (“Micula Award"); Tr. Day 1, 90;22-91:7. ↩

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State Aid Decision merely stated that the remuneration for the standard facilities under the RF#3 did not violate state aid because it did not give excessive remuneration that would raise state aid concerns. In turn, as the EC's State Aid Decision addressed neither the proportionality nor the reasonableness of remuneration regime of RD 661/2007, it addressed neither the effects of the Disputed Measures on JGC's specific investment nor whether there was any overcompensation or incompatible state aid to the Solacor Plants under RF#1 if it had stayed in place all the way through from the initial operation of the Solacor Plants until the end of their useful lifetime.⁶⁹² As a result, the Claimant asserts, the EC Decision's analysis of proportionality of the aid under RF#3 did not mean that the returns under RF#1 would be incompatible with EU state aid law.⁶⁹³

596. With respect to the Respondent's argument that the assessment of Abengoa and Atlantica Yield's presentations and prospectus support the Respondent's case,⁶⁹⁴ the Claimant disagrees and points to the evidence of Mr. Zuluaga as follows⁶⁹⁵:

1. Mr. Zuluaga clarified in his witness statement the context of these statements by saying that Abengoa was not stating that the new remuneration regime was positive but that, once RD-L 9/2013 abrogated RD 661/2007, the subsequent pieces of legislation to be approved by the Respondent would not be worse. At the time of those presentations, the details of the new remuneration system were not known.
2. Mr. Zuluaga testified at the Hearing that “what is clear is that this new regulatory framework is different from the prior one”⁶⁹⁶ and “the remuneration is lower when we compare both regulatory frameworks.”⁶⁹⁷

597. With respect to the Respondent's argument concerning the statement made in the Management report for the financial year 2016⁶⁹⁸, the Claimant refers to Mr Zuluaga's testimony in the Hearing`indicating that such statement meant that “the company can fulfil

⁶⁹² Cl. PHB, para. 139. ↩
⁶⁹³ Cl. Closing, slide 34; Cl. PHB, para. 141. ↩
⁶⁹⁴ Resp. Opening, slides 171-173. ↩
⁶⁹⁵ Cl. PBH, para. 137, referring to Mr. Zuluaga's witness statement (CWS-AZ), paras. 12, 14, 17-19, 22 and 25. ↩
⁶⁹⁶ Tr. Day 2, [Zuluaga] 102:11-13. ↩
⁶⁹⁷ Ibid., 102:19-21. ↩
⁶⁹⁸ Resp. Opening, slide 173. ↩

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their obligations, and that's the meaning of that sentence. But this is not a judgment about the profitability of the investment or anything related to the profitability of the investment".⁶⁹⁹

(g) The Claimant's position on the standard of protection and the Respondent's breaches of obligations under the ECT

598. The Claimant submits that the Respondent's actions and omissions constitute at the same time breaches of various standards of protection of Article 10(1) of the ECT and entail the Respondent's international responsibility and obligation to repair damages caused to the Claimant.⁷⁰⁰

(i) Stability obligation in Article 10(1) of the ECT

599. The Claimant submits that the fundamental objectives of the ECT are to require the Contracting States to maintain a stable and transparent legal and regulatory framework for energy sector investments, and to provide substantive protections (which include, but are not limited to, fair and equitable treatment) and the procedural mechanism of investor-State dispute settlement, with a view to reducing political and regulatory risks and thus facilitating investments in the energy sector.⁷⁰¹

600. The Claimant further submits that the provision of a stable legal and business environment is of particular importance in the energy sector where, as in the present case, a substantial amount of capital is typically committed at the outset of a project in order to generate a long-term return. This need for equitable, stable and effective legal regimes to promote investments in the energy sector, and the role of the ECT in this regard, have also been repeatedly recognised by multinational organisations and fora.⁷⁰²

601. The Claimant stated in its closing submission on the final day of the Hearing as follows:

“Article 10(1) includes the FET standard as applied by ECT tribunals and other international tribunals today. And more importantly, it includes an express

⁶⁹⁹ Cl. PHB, para. 137, referring to Mr. Zuluaga's testimony, Tr. Day 2, [Zuluaga] 105:23-25. ↩
⁷⁰⁰ The Claimant in its Memorial focused more on the umbrella clause argument. However, it's focus shifted to the stability obligation and the FET standard in its opening and closing statements at the Hearing and the PHB. ↩
⁷⁰¹ Cl. Reply, para. 80. ↩
⁷⁰² Id. ↩

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obligation on the part of the state to provide legal stability, which makes the state's duty to protect stability obligations particularly strong. The state has a sovereign right to regulate. But the ECT imposes very clear limits on actions that generate distrust on the investor because these actions are bad for the investment climate, which is precisely what the ECT is trying to protect.”⁷⁰³

602. Specifically, the Claimant considers that the first sentence of Article 10(1) of ECT imposes a duty on the Kingdom of Spain to provide fundamental stability to the essential characteristics of the legal regime on which the investor relied to carry out its long-term investment.⁷⁰⁴ The Claimant asserts that such guarantee of stability does not depend on the existence of any specific commitments provided expressly to the investor.⁷⁰⁵ In support of its position, the Claimant cites the tribunal in Antin v. Spain which observed that:

"the language of Article 10(1) of the ECT is not merely a suggestion or a recommendation for the Contracting Parties (...) The modal verb ‘shall' expresses an instruction, command or obligation and therefore compliance with the ECT requires that each Contracting State shall not only encourage but also create stable, equitable, favourable and transparent conditions for Investors of other Contracting Parties to make Investments in its Area.”⁷⁰⁶

603. The Claimant emphasizes that the investors in the renewable energy sector have a strong interest in the stability of the regulatory scheme, including, any incentive schemes for renewable energy, and protection from unwarranted government policy changes that could amount to expropriation or a denial of fair and equitable treatment.⁷⁰⁷ It is precisely because of the particularities of energy investments that the ECT offers a higher or more robust level of protection than most BITs.⁷⁰⁸

(ii) The FET standard in Article 10(1) of the ECT

604. The Claimant submits that the FET standard embodied in the second sentence of Article 10(1) of the ECT is an absolute standard. It is autonomous and different from and beyond the minimum standard of treatment of the customary international law. The Claimant states that the FET has been consistently interpreted as more protective than the minimum

⁷⁰³ Tr. Day 6, 24:14-24. ↩
⁷⁰⁴ Tr. Day 1, 71:1-6. ↩
⁷⁰⁵ Cl. PHB, para. 123. ↩
⁷⁰⁶ Antin Award, para. 525 (CL-0182). ↩
⁷⁰⁷ Cl. Mem., para. 1157. ↩
⁷⁰⁸ Cl. Rep, paras. 80-83: Cl. Closing, slide 44. ↩

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standard of treatment under customary international law.⁷⁰⁹ In support of its position, the Claimant cites decisions of previous arbitration cases dealing with claims brought under the ECT including Plama v. Bulgaria, Liman Caspian Oil v. Kazakhstan, as well as Professor Schreuer and other scholarly opinions.⁷¹⁰

605. The Claimant contends that the Respondent's position on the object and purpose of the ECT that the “national treatment” protection is “the maximum aspiration of the ECT”⁷¹¹ is misguided.⁷¹² The Claimant asserts that this position is contrary to the express provisions of Article 10(1) of the ECT and that Spain's additional obligation to afford “national treatment” in Article 10(7) ECT, which is presently not at issue in this arbitration, does not detract from, or override, the other substantive obligations the Respondent expressly undertook under the ECT.⁷¹³

606. The Claimant presents that the link between the FET and long-term stability has been suggested by commentators to serve as the basis for affording the legitimate expectations of investors operating in the energy field comparatively greater protection against changes to regulatory regimes.⁷¹⁴ According to the Claimant, a particularly important element of the FET standard in the ECT is the protection against State conduct that undermines the stability and predictability of the legal and economic framework upon which an investor reasonably relied in making its investment.⁷¹⁵ The Claimant submits that the tribunals dealing with the Spanish CSP cases confirmed that Article 10 of ECT includes an obligation to provide fundamental stability of the economic and legal regime in place at the date of the investment and that the FET protects against changes in the essential

⁷⁰⁹ Cl. PHB, para. 124. ↩
⁷¹⁰ Cl. Mem., para 1134 and footnote 1190, citing Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award, August 27, 2008, para. 163 (CL-0017) (“Plama Award”) and Liman Caspian Oil BV and NCL Dutch Investment BV v. Republic of Kazakhstan, ICSID Case No. ARB/07/14, Award, June 22, 2010, para. 263 (Cl-0074) (“Liman Award”) and articles of Professor Schreuer, K. Yannaca-Small and Salacuse. ↩
⁷¹¹ Resp. Rej., para. 1469; Resp. C-Mem., para. 1017. ↩
⁷¹² Cl. Reply, para. 75. ↩
⁷¹³ Cl. Reply, para. 76; Cl. Closing, slide.44. ↩
⁷¹⁴ Cl. Mem., para 1134. ↩
⁷¹⁵ Cl. Reply, para 87. ↩

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characteristics of the regulatory regime relied upon by investors at the time of investment.⁷¹⁶

607. In support of its position the Claimant refers to the view expressed by the tribunal in Eiser v. Spain stating that:

“Taking account of the context and of the ECT's object and purpose, the Tribunal concludes that Article 10(1)'s obligation to accord fair and equitable treatment necessarily embraces an obligation to provide fundamental stability in the essential characteristics of the legal regime relied upon by investors in making long-term investment. This does not mean that regulatory regimes cannot evolve. Surely they can. [...] However, the Article 10(1) obligation to accord fair and equitable treatment means that regulatory regimes cannot be radically altered as applied to existing investments in ways that deprive investors who invested in reliance on those regimes of their investment's value."⁷¹⁷

608. In addition, referring to the award in Micula v. Romania followed by the tribunal in Novenergia v. Spain, the Claimant points out that the tribunals did not accept the argument that a paradigm change would be lawful when the legal regime had always been unstable; the tribunal upheld that there is a duty on the State to respect essential regulatory conditions used to induce investments, even in the absence of a specific commitment.⁷¹⁸ The Claimant goes on to point out that the Micula tribunal did not accept Romania's attempt to justify the change of the regulatory model arguing that the legal framework had always been unstable. The Claimant views the Respondent's argument that the regulatory framework has been dynamic similar to Romania's failed argument.⁷¹⁹

609. The Claimant submits that the FET standard protects against “a radical or fundamental change to legislation” citing the tribunal in Novenergia v. Spain which observed that the FET standard “protect[s] investors from a radical or fundamental change to legislation or other relevant assurances by a state that do not adequately consider the interests of existing investments already made on the basis of such legislation.”⁷²⁰

⁷¹⁶ Tr. Day 1, 71:1-6. ↩
⁷¹⁷ Cl. Opening, slide 160, citing Eiser Award, para. 382 (CL-0149). ↩
⁷¹⁸ Tr. Day 1, 73:20-74:4. ↩
⁷¹⁹ Tr. Day 1, 74:15-18. ↩
⁷²⁰ Cl. Opening, slide 163, citing Novenergia Award, para. 654 (CL-0173); Tr. Day, 1 74:24-75:3. ↩

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(iii) Legitimate expectations

610. The Claimant asserts that Spain's key obligation under Article 10(1) is its duty to protect JGC's stability expectations. It cites the tribunal in Antin v. Spain holding that⁷²¹:

“This does not mean that the legal framework cannot evolve or that a State Party to the ECT is precluded from exercising its regulatory powers to adapt the regime to the changing circumstances in the public interest. It rather means that a regulatory regime specifically created to induce investments in the energy sector cannot be radically altered –i.e., stripped of its key features –as applied to existing investments in ways that affect the investors who invested in reliance on those regimes."

611. The Claimant submits that when a State attracts investments promising basic regulatory conditions, it acquires a duty to maintain those conditions central to the investment decision.⁷²² In seeking guidance from previous cases, the Claimant cites Total v. Argentina which held that “a claim to stability can be based on the inherently prospective nature of the regulation at issue aimed at providing a defined framework for future operations ..."⁷²³ Relying on the Total tribunal's view that “[e]xpectations based on such principles are reasonable and hence legitimate, even in the absence of specific promises by the government",⁷²⁴ the Claimant submits that even if there is no specific commitment from the government in the eyes of the tribunal, the tribunal should also find that there is a breach of Article 10 ECT, a breach of the FET standard, a breach of these obligations to provide stability, to provide fundamental stability in the essential characteristics of the legal regime.⁷²⁵

612. The Claimant submits that an investor is entitled to expect that the regulatory framework will remain stable and consistent and, hence, legitimate expectations may also be breached by infringing the implicit requirement for stability and consistency. A clear example of behaviour contrary to stability and consistency is what has been termed as “roller-coaster” changes in the law (i.e., consecutive changes in the law that occur within a relatively short

⁷²¹ Cl. Closing, slide 43, citing Antin Award, para. 532 (CL-0182). ↩
⁷²² Tr. Day 1, 72:19-25; Tr. Day 6, 23:23-24:3 ↩
⁷²³ Tr. Day 1, 73:3-6, referring to Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/1, Decision on Liability, December 27, 2010, para. 122 (CL-0109) (“Total Decision"). ↩
⁷²⁴ Ibid., 73:8-10, citing Total Decision, para. 333. ↩
⁷²⁵ Ibid., 73:11-19. ↩

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period of time) because “[s]tability cannot exist in a situation where the law kept changing continuously and endlessly.”⁷²⁶

613. The Claimant states that there is consensus within the international legal community that the most important function of the FET standard is the protection of the investor's reasonable and legitimate expectations.⁷²⁷

614. In support of its statement, the Claimant relies upon Electrabel v. Hungary, where the tribunal acknowledged that under the ECT the FET comprises an obligation

“to act transparently and with due process; and to refrain from taking arbitrary or discriminatory measures or from frustrating the investor's reasonable expectations with respect to the legal framework adversely affecting its investment. "⁷²⁸

615. The Claimant considers that stability is a part of the FET obligation under Article 10(1) of the ECT. The Claimant states that since regulatory stability is always a decisive factor for foreign investors when deciding whether or not to make an investment in a particular country, especially in the long-term, denying the FET's role in terms of stability and consistency would be incompatible with the spirit of international investment treaties such as the ECT. It continues that the idea that regulatory stability is a legitimate expectation upon which investors may rely makes particular sense in the context of the ECT, the reason being the explicit text of the first sentence of Article 10(1) of the ECT.⁷²⁹

616. The Claimant submits that the clarity of the terms used to make the commitment, assurance or promise is the decisive factor in determining the legitimacy of an expectation which should also have been relied upon by the investor. Relying upon Micula v. Romania, the Claimant asserts that it is not necessary for the entire investment to have been solely based on such an expectation, but the legitimate expectation should have been a determining

⁷²⁶ Cl. Mem., para. 1167, quoting PSEG Global Inc. and Konya Ilgin Elektrik Üretim ve Tikaret Limited Sirketi v. Republic of Turkey, ICSID Case No. ARB/02/5, Award, January 19, 2007, para. 254 (CL-0002) (“PSEG Award”). ↩
⁷²⁷ Ibid., para. 1146, quoting the Electrabel Decision, para. 7.75 (CL-0098). ↩
⁷²⁸ Ibid., para. 1140, quoting Electrabel, Decision, para. 7.74 (CL-0098). ↩
⁷²⁹ Ibid., para. 1159. ↩

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factor in an investor's decision to invest, or in the manner or magnitude of its investments.⁷³⁰

617. The Claimant also submits that the previous decisions held that the legitimate expectations could be based on specific commitments, but also (as pointed out in the Masdar award) the totality of the Spanish legislative regime; commitments made outside of the general legislation could also be taken into account.⁷³¹

618. In this regard, the Claimant cites the tribunal in SolEs v. Spain which recalled that investors' legitimate expectations could not only arise from specific commitments, but also “from provisions of law and regulations and from statements made by or on behalf of the State for the purpose of inducing investment by class of investors.”⁷³²

619. The Claimant also cites the tribunal in Cube Infrastructure which affirmed that it was not necessary that a specific commitment be made to each individual claimant in order for a legitimate expectation to arise as follows:⁷³³

“At least in the case of a highly-regulated industry, and provided that the representations are sufficiently clear and unequivocal, it is enough that a regulatory regime be established with the overt aim of attracting investments by holding out to potential investors the prospect that the investments will be subject to a set of specific regulatory principles that will, as a matter of deliberate policy, be maintained in force for a finite length of time. Such regimes are plainly intended to create expectations upon which investors will rely; and to the extent that those expectations are objectively reasonable, they give rise to legitimate expectations when investments are in fact made in reliance upon them. "⁷³⁴ [Emphasis added by the Claimant]

620. The Claimant further submits that the tribunal in Suez v. Argentina has given strong importance to the protection of legitimate expectations under the FET in international investment law, in particular the investor's reliance upon the representations made by the host State in its legislation.⁷³⁵ The Claimant quotes the following from Suez v. Argentina:

⁷³⁰ Ibid., para. 1163, citing Micula Award, para. 672 (CL-0103). ↩
⁷³¹ Tr. Day 1, 71:7-16; See Cl. Opening, slide 157, item 2 (Masdar column, referring to para. 511). ↩
⁷³² Cl. New Cases, para. 47, citing SolEs Award, para. 313 (CL-0209), referring to Antin Award, para. 538 (CL-0182). ↩
⁷³³ Cl. New Cases, para. 48. ↩
⁷³⁴ Cube Decision, para. 388 (CL-0203). ↩
⁷³⁵ Cl. Mem., para. 1147. ↩

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“In examining the various cases that have justifiably considered the legitimate expectations of investors and the extent to which the host government has frustrated them, this Tribunal finds that an important element of such cases has not been sufficiently emphasized: that investors, deriving their expectations from the laws and regulations adopted by the host country, acted in reliance upon those laws and regulations and changed their economic position as a result.
Thus it was not the investor's legitimate expectations alone that led tribunals to find a denial of fair and equitable treatment. It was the existence of such expectations created by host country laws, coupled with the act of investing their capital in reliance on them, and a subsequent, sudden change in those laws that led to a determination that the host country had not accorded protected investments fair and equitable treatment. ”⁷³⁶

621. The Claimant submits that legitimate expectations are created when a State's conduct is such that an investor may reasonably rely on that conduct as being consistent. It further submits that commitments, promises or assurances attributable to competent organs or representatives of the host State may create legitimate expectations on the investor, irrespective of whether they were explicit or implicit, or whether they were issued generally or specifically. In particular, legitimate expectations may stem from the provisions included in a State's domestic legislation dealing with the regulatory framework applicable to a particular economic sector, be it renewable energy or oil and gas. The Claimant quotes LG&E v. Argentina tribunal holding that:

“Argentina made these specific obligations to foreign investors, such as LG&E, by enacting the Gas Law and other regulations, and then advertising these guarantees. "⁷³⁷ [Emphasis added by the Claimant]

622. The Claimant submits that legitimate expectations may be linked to what is generally termed as 'regulatory stability', i.e., the existence and maintenance of a stable and consistent regulatory framework. In this regard, the Claimant cites Duke Energy v. Ecuador tribunal which held that:

"The stability of the legal and business environment is directly linked to the investor's justified expectations. (...) To be protected, the investors' expectations must be legitimate and reasonable at the time when the investor makes the investment. The assessment of the reasonableness or legitimacy must take into

⁷³⁶ Ibid., para. 1147, quoting Suez, Sociedad General de Aguas de Barcelona S.A. and Interagua Servicios Integrales de Agua S.A. v. Argentine Republic, ICSID Case No. ARB/03/17, Decision on Liability, July 30, 2010, para. 207 (CL-0088) ("Suez Decision"). ↩
⁷³⁷ Ibid., para. 1148, quoting LG&E Energy Corp., LG&E Capital Corp. and LG&E International Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, October 3, 2006, para. 175 (“LG&E Decision") (CL- 0058). ↩

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account all circumstances, including not only the facts surrounding the investment, but also the political, socioeconomic, cultural and historical conditions prevailing in the host State. "⁷³⁸

623. The Claimant quotes Professor Schreuer as follows:

“Stability means that the investor's legitimate expectations based on this legal framework and on any undertakings and representations made explicitly or implicitly by the host State will be protected. The legitimate expectations of the investor will rest primarily on the legal order of the host state as it stood at the time when the investor acquired the investment (...) An arbitrary reversal of such undertakings will constitute a violation of FET. While the host State is entitled to determine its legal and economic order, the investor has a legitimate expectation in the system's stability to facilitate rational planning and decision making. ”⁷³⁹

624. The Claimant submits that the requirement of the existence of ‘specific commitments' applies only to the sub-standard of legitimate expectations of the FET standard. The duty to provide stability in the first sentence of Art. 10(1) ECT applies even though in the instant case there were no specific commitments of legal stability of RF#1 (quod non).⁷⁴⁰

625. The Claimant submits that investors are legitimately entitled to believe that the regulatory framework will remain stable and consistent over time, particularly when investing in a state like Spain with “political, socioeconomic, cultural and historical conditions” of seriousness and reliability as an investment-friendly State.⁷⁴¹ In this regard, the Claimant quotes the tribunal in Charanne v. Spain stating that:

“The Tribunal agrees with other tribunals which have concluded, based on the principle of good faith in customary international law, that a State cannot encourage an investor to make an investment (thus giving rise to legitimate expectations) and then disregard the commitments arising out of those expectations. "⁷⁴²

626. The Claimant submits that such legitimate expectations may be breached as a result of any subsequent conduct of the host State that contradicts them and that a change to the regulatory framework is an example of conduct of such kind.⁷⁴³

⁷³⁸ Ibid., para 1153, quoting Duke Award, para. 340 (CL-0108). ↩
⁷³⁹ C. Schreuer, “Fair and Equitable Treatment' in A. K. Hoffmann (Ed.), Protection of Foreign Investments, p. 126 (CL-0090), quoted in Cl. Mem., para 1154. ↩
⁷⁴⁰ Cl. PHB, para. 125. ↩
⁷⁴¹ C. Mem., para. 1155. ↩
⁷⁴² Charanne Award, para. 486 (CL-0009/CL-0009t), quoted by the Claimant in Cl. Mem., para. 1155. ↩
⁷⁴³ Cl. Mem., para 1165. ↩

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627. The Claimant further submits that the form, content, clarity and specificity of the commitment, promise or assurance, determines the degree to which such a limitation applies, being the limitation absolute if specific commitments, promises or assurances have been made by the host State. Specific commitments are not just those addressed to a particular investor or group of investors, but also those which are “specific regarding their object and purpose.” The Claimant continues that for the purposes of the analysis of legitimate expectations, it is to note that contractual arrangements entered into by the respondent State are relevant.⁷⁴⁴

(iv) Application of the stability obligations and the FET in Article 10(1) of the ECT

628. Asserting that the Respondent's key obligation under Article 10(1) is its duty to protect JGC's stability expectations,⁷⁴⁵ the Claimant claims that it has demonstrated that it had the legitimate expectation under the first sentence of Article 10(1) of the ECT that Spain would not alter the essential characteristics of the remuneration regime relied upon by the Claimant at the time of its investment. In the Claimant's view, the abrogation of the RD 661/2007 feed-in system and its substitution by the radically different new remuneration regime is out of discussion. As a result, Spain is in breach of the first sentence of Art. 10(1) ECT.⁷⁴⁶

629. In addition, the Claimant submits that the Respondent provided the Claimant with specific stability commitments in the form of Article 44(3) RD 661/2007, the July 2, 2010 Agreement, the Comfort Letter to NEXI, Articles 2 to 4 of RD 1614/2010 and the Acceptance Letters. Consequently, Spain is also in breach of the FET standard of the second sentence of Art. 10(1) ECT.

630. The Claimant claims that, given the extent of the Disputed Measures as they have impacted the Claimant's investments, the Respondent has breached its obligations under Article 10(1) of the ECT to accord at all times fair and equitable treatment to the Claimant through

⁷⁴⁴ Ibid., para. 1166. ↩
⁷⁴⁵ Tr. Day 6, 23:20-22. ↩
⁷⁴⁶ Cl. PHB, para. 126. ↩

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the Disputed Measures taken between 2012 and 2014, which in its view, amounted to a “paradigm change" of the original legal regime.

631. The Claimant asserts that each of the measures taken by the Respondent under RF#2 and RF# 3 is in itself contrary to the ECT because they blatantly abrogate the right the Claimant is entitled to under RF#1, and thus the Tribunal does not need to assess those regulatory measures in aggregate, but individually in order to declare them as breaches of the ECT. However, if the Disputed Measures are taken altogether as a whole, it could be considered as an aggravation of the breaches of all ECT standard invoked by the Claimant.⁷⁴⁷

632. The Claimant states that the breaches of Article 10(1) of the ECT committed by the Respondent have lasted since the enactment of each piece of legislation of RF#2 and RF#3 and remain not in conformity with the Respondent's international obligations under the ECT.⁷⁴⁸

633. In support of its claim that the Disputed Measures are in breach of Spain's obligation under Article 10(1) of the ECT, the Claimant cites the conclusion reached by the tribunal in Antin v. Spain which reads as follows:

“In this case, it is undisputed that through RDL 9/2013 and Law 24/2013, Spain (a) replaced the FIT system by a remuneration system that allowed certain RE installations to obtain a special payment installation by reference to a standard and (b) withdrew the right of priority of grid access and priority of dispatch for RE installations. Moreover, RDL 9/2013, Law 24/2013 and Ministerial Order IET/1045/2014 dismantled all the regime and therefore all the features of the regime provided for under RD 661/2007.
... it would necessarily conclude that Spain breached its obligations under Article 10(1) of the ECT by eliminating those features through RDL 9/2013 and Law 24/2013. "⁷⁴⁹ [reference to footnote omitted]

634. The Claimant states that the tribunals in the Eiser, and Masdar cases also found that Spain breached 10(1) of the ECT because the Disputed Measures breached this particular duty.

⁷⁴⁷ Cl. Mem., para. 952. ↩
⁷⁴⁸ Ibid., para. 953. ↩
⁷⁴⁹ Cl. Opening, slide 174 [sic], Antin Award, para. 560 (CL-0182). ↩

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These decisions are the essential precedents because they are based on the same facts in this case, and because they share a consistent reasoning revolving around this duty.⁷⁵⁰

635. The Claimant argues that the cases of Charanne and Isolux, which did not find Spain to have breached its obligation under Article 10(1), stand in isolation. According to the Claimant, while Charanne is distinguished in that the disputed measures concerned were limited to the 2010 measures involving the PV technology sector, Isolux related to the same Disputed Measures under review in this arbitration proceeding, but involved PV technology with different facts. The investor in the Isolux case invested in October 2012.⁷⁵¹

636. The Claimant asserts that the Respondent's analysis of the proportionality of the Disputed Measures is flawed and ignores their impact on the Solacor Project.⁷⁵² In the Claimant's perspective, while the Respondent suggests that the test of balancing only requires to check the existence of a rational policy and the reasonableness of the act in relation to that policy relying on AES Summit and Electrabel,⁷⁵³ The Claimant argues that the proposed test is problematic because it obviates the interests and protection of the aggrieved party and that that is the reason why investment tribunals follow a more balanced approach, like the one proposed in Occidental v. Ecuador⁷⁵⁴ which required consideration of whether the effects of the measure were disproportionate or excessive in relation to the interests involved, i.e., whether the benefit of realising the State's aim exceeded the harm to the relevant rights of investors.

637. The Claimant contends that the effect of the Disputed Measures on the Solacor Project is so harmful that they cannot be considered proportionate.⁷⁵⁵

⁷⁵⁰ Tr. Day 6, 24:4-9. ↩
⁷⁵¹ Tr Day 1, 75:19-76:3. ↩
⁷⁵² Cl. PHB., Section V.C. ↩
⁷⁵³ Resp. Closing, slide 81, quoting AES Summit Generation Limited and AES-Tisza Eromu Kft v. Hungary, ICSID No. ARB/07/22, Award, September 23, 2010, paras. 10.3.7 and 10.3.9 (RL-0039) (“AES Summit Award"); and Electrabel S.A. v. Hungary, ICSID Case No. Arb/07/19, Award, November 25, 2015 (RL-0048) (“Electrabel Award"), para. 179. ↩
⁷⁵⁴ Cl. PHB, para. 134, citing Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of Ecuador, ICSID Case No ARB/06/11, Award, October 5, 2012 (CL-0153) (“Occidental Award"), paras. 416, 428-436 and 450; See also Cl. Reply, para. 420. ↩
⁷⁵⁵ Cl. PHB., para. 137. ↩