ARB/15/34 (Decision on Jurisdiction, Liability and Directions on Quantum, 31 August 2020). The Cavalum tribunal elaborated on the type of information about the regulatory framework that should have been taken into account by the investor when making the investment decision. (l) Once again, the regulator states that, "The right to receive the regulated tariff or if appropriate the premium, shall be subject to final registration of the facility" in RAIPRE by the date fixed under Article 22 (Article 17.c). (f) Sub-group b.1.1 covers facilities "which use solar radiation alone as their primary energy by means of photovoltaic technology" (Article 2.1b). In the present circumstances, I accept that I am in a minority on such matters and, accordingly, with respect to the next steps in this arbitration, I will participate fully with my colleagues in the determination of the reasonable rate of return issues as directed in the Decision. ARB/15/42 (Decision on Jurisdiction, Liability and Direction on Quantum, 9 March 2020). The duration of the identified FIT is not mysterious or obscure in any sense. ARB/15/34) Presiding Arbitrator, Hela Schwarz GmbH v. People’s Republic of China (ICSID Case No. ARB/15/45; Mathias Kruck et al. These regulations are at the centre of this dispute. 3 (English and Spanish) February 21, 2017 _ E.ON SE, E. ON Finanzanlagen GmbH and E. ON Iberia Holding GmbHv. They state: I respectfully disagree with this conclusion. Those decisions broadly addressed either the non-immutability of regulations in the electricity sector or the general principle embedded in Law 54/1997, that a producer was entitled to expect a reasonable rate of return on its investment. Firstly, the decision affirms that the existence of an investor’s duty to conduct due diligence as a part of a balancing exercise in assessing the legitimate expectations of an investor and the state’s right to regulate. The number of special economic zones (SEZs) is growing, and so is the attention of policy makers, lawyers and academics in both the developed and the developing world. These coincide with the targets of the Renewable Energy Plan 2005-2010 and the Strategy for Energy Saving and Efficiency in Spain (E4). 2017-23) Arbitrator, Tennant Energy LLC v. Government of Canada The tribunal does not really elaborate on these doctrines, except an observation that the state’s margin of appreciation conveys a ‘wide latitude’ of the state’s regulatory powers, which however is subject to the compliance under the ECT and customary international law. This makes it necessary to provide these investments with continuity and expectations, and also to determine a progressive pattern for the implementation of this technology, which can in addition contribute to the fulfillment of targets in the 2005-2010 Renewable Energy Plan, and of those to be fixed in the 2011-2020 Renewable Energy Plan, in accordance with targets set forth for Spain under the new Directive on Renewable Energy. [8] In the words of the tribunal, the obligation of stability has ‘a relatively high threshold’ and only protects against fundamental changes. The requirements placed on the PV plants to qualify for the Special Regime were limited to registration with the RAIPRE, a requirement which all of the PV Plants had met within the prescribed cut-off date [internal footnotes omitted]. ARB/15/34. The Society organized the DEVELOPING ARBITRATION IN PAKISTAN – FROM AD HOC TO INSTITUTIONAL ARBITRATION. What was open to review in 2010 under this article were "tariffs, premiums, supplements and lower and upper limits", as defined in this decree, the degree of participation of the Special Regime in covering the demand and its impact on the technical and economic management of the system and a reasonable rate of profitability, which was always to be guaranteed with reference to the cost of money in the capital markets. The same holds true regarding the indications given in the name of the Respondent. Under the FET standard, the expectations of an investor maybe subject to protection only if they are ‘(at least) reasonable and justifiable.’ [15] Fourthly, ‘a reasonable market expectation (…), justified or not, is not a basis for shifting risks to the public sector, i.e., the state budget, The formulation of what a due diligence should entail in, By placing importance on the national law and in particular the national judgments, Cavalum follows several previous Spanish investment cases (, The tension between the state’s right to regulate and the legitimate expectations of the investor tends to arise when the stability of an investor’s investment is undermined by a state’s measures (further elaboration, A noteworthy part of the Cavalum decision concerns the investor’s due diligence. Cavalum's first five facilities were finally and timely registered in RAIPRE before 28 September 2008.17. RD 1578/2008 applies to "facilities in group b.1.1 [solar PV facilities]" "that obtained definitive registration after September 29, 2008" in RAIPRE. In my opinion, this plain language contemplates that these tariffs would apply, effectively, for the operational lifetime of such plants. These options may be selected for periods of not less than one year, meaning, in practical terms, that a producer could make an annual election (Article 24.4). [5], In 2016, Cavalum (the claimant) initiated an investment claim against Spain under the Energy Charter Treaty (ECT), arguing that the value of its investments had been destroyed because of the State’s modification of the regulatory regime. I likewise do not agree that our tribunal should follow that approach in this case. ARB/15/34, Decision on Jurisdiction, Liability and Directions on Quantum Already registered ? Investment treaty: Energy Charter Treaty (ECT) Applicable legal instruments: Energy Charter Treaty (ECT) Under the heading, "Article II -Tariffs", RD 1578/2008 prescribes that, "The rates of regulated tariffs for the sub-group b.1.1 facilities [...] are fixed as follows:". ARB/15/35); OperaFund Eco-Invest SICAV PLC and Schwab Holding AG v. Spain (case No. treaty-based.com is a website for information and discussion on investor-state arbitration.. ARB/15/34; JGC Corp. v. Spain, ICSID Case No. This contrasts with SolEs v. Spain, OperaFund v. Spain and Cube v. Spain, in which the tribunals took a restrictive approach to the relevance of the Supreme Court judgments. And, as already indicated, I would find that these promises to Sub-group b).1.1 facilities, in particular, objectively created an understanding of regulatory stability on which Claimant reasonably relied and which induced Claimant to invest as it did in Spain's renewable energy sector. Arbitrator, Cavalum SGPS, S.A. v. Kingdom of Spain (ICSID Case No. (c) In the new prospectus in the "The Sun Can Be All Yours" series in June 2007, the IDAE wrote that investors in the PV sector would "obtain [] a maximum return on the investment" throughout the lifespan of the facility, namely through the FIT in RD 661/2007. v. The Kingdom of Spain – ICSID Case No. The tribunal relies on several decisions of the Spanish Supreme Court, [26] as justification for the foreseeability of the changes to the state’s regulatory framework. Finally, one further provision must be noted, as follows: Spain contends that this amendment authorized the wholesale revamping of the regulatory regime for PV facilities that it created in 2013 and 2014. Julia Yevashova, ‘Cavalum v. Spain: Legitimate Expectations of an Investor with a Focus on Due Diligence’ (ICAR, 24 September 2020) <. In its discussion of what is required to establish legitimate expectations, the tribunal in the. social, environmental, and legal. 523. Beyond these explicit promises, there were a number of surrounding circumstances which made that explicit language even more compelling. The Tribunal agrees. By continuing your visit on this site, you accept the use of cookies for purposes of audience measurement and service improvement. Applicable arbitration rules: ICSID Convention - Arbitration Rules. Address: As far as we know this information was accurate when it was published (see years in brackets), but may have changed since then. Decanter travel guide: Cava country, Spain Sarah Jane Evans March 8, 2016 . These provisions as well as those in Articles 4 and 5 of RD 1614/2010 show that adjustments were to be envisaged. ARB/15/36, pending. It is well understood that in the application of international law in a case such as this, we are not subject to binding authority in the sense of. [19] The latter threshold implies that the investor is expected not only to conduct a basic commercial due diligence, but also obtain ‘a detailed knowledge of the legal system.’ [20] This ‘detailed knowledge’, is expected to be obtained by an investor from qualified legal advisers. As follows from the Tribunal’s analysis, the Spanish measures that amounted to a replacement of an incentive system were taken in public interest [31] and fell under the state’s margin of appreciation. Firstly, the decision affirms that the existence of an investor’s duty to conduct due diligence as a part of a balancing exercise in assessing the legitimate expectations of an investor and the state’s right to regulate. … I do not accept Spain's submissions in this regard and will briefly set out my reasons. ARB/15/34) Procedural Order No. ARB/15/25) Arbitrator, Cavalum SGPS, S.A. v. Kingdom of Spain (ICSID Case No. In context, it is only one of several references which, it appears, are to be considered when setting remuneration arrangements for electric power generation installations operating under the special regime in relation to the payment of premiums. Whether such a legitimate expectation was violated can only be assessed by way of a global view of the situation that resulted from the modifications introduced by the Respondent after the date of the investment. encompasses more than 38,000 hectares of vineyards and more than 6,800 winegrowers. ARB/15/25; Matthias Kruck, et al. ARB/15/27); KS Invest GmbH and TLS Invest GmbH v. Spain (ICSID Case No. The arbitral tribunal in Electrabel, acknowledged that '[w]hile specific assurances given by the host State may reinforce the investor's expectations, such an assurance is not always indispensable'. Ownership of five solar power plants in Western and Central Spain. Spain has said that any reasonably informed investor performing an "exhaustive due diligence" before investing as Claimant did, would have understood for a variety of reasons that there could be no immutability in the promises and guarantees set out in RD 661/2007 and RD 1578/2008. Since preparing this Dissenting Opinion, I have received the Final Award together with the Concurring and Dissenting Opinion of Charles N. Brower in the case of, I do not agree with the majority view in the, With respect to a further sub-category of four of those eleven cases, he observes that they "specifically involved PV installations and timely RAIPRE registration....", Based on these virtually identical circumstances, Judge Brower concluded that logic dictated that the investors in his case would "harbour the same expectations and that this sub-category of the eleven cases be followed absent compelling contrary reasons." The crucial point is whether the state, through statements or conduct has contributed to the creation of a reasonable expectation, in this case, a representation of regulatory stability. ARB/15/34) Presiding Arbitrator, Hela Schwarz GmbH v.People’s Republic of China (ICSID Case Subsequently a further review shall be performed every four years, maintaining the same criteria as previously. Once Cavalum had been induced to rely on the durability of the regulated tariffs in RD 661/2007 and RD 1578/2008, I do not agree its vested rights in those tariffs could be fundamentally taken away through applying an after-the-fact general principle of reasonable return. Firstly, let me consider the relevant Spanish Supreme Court jurisprudence. 2015/150. 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 to achieve reasonable profitability rates with reference to the cost of money on capital markets. RD 661/2007 AND RD 1578/2008 AND CLAIMANT'S LEGITIMATEEXPECTATIONS, A. [21] Cavalum v. Spain (2020), ¶ 520; ¶ ¶ 523-527. [2] In making its investment decision, Cavalum relied on RD 661/2007 and RD 1578/2008 that, according to the investor, guaranteed that its PV installations would obtain incentive tariffs at fixed amounts for a period of 25 years and 80% of these fixed amounts would be secured for the remaining lives of PV plants.