The World Bank International Centre for Settlement of Investment Disputes (ICSID) has seen a surge in cases related to the Spanish government's policy changes regarding solar energy investments. These disputes revolve around the regulatory changes made to the solar sector in Spain and have sparked extensive arbitration proceedings.
Spain was once considered a global leader in promoting renewable energy, particularly solar power. The Spanish government introduced incentives in the mid-2000s to attract investors, which led to a significant expansion of the solar industry. Over 66,000 families and solar companies pledged $70 Billion into the incentive ensuring that Spain reached the EU target of 20% renewable energy in 2010, way before any other European country. However, the economic downturn in the late 2000s prompted the Spanish government to reevaluate its renewable energy policies.
As part of its economic austerity measures, Spain introduced a series of regulatory changes that severely impacted solar energy investors. The Spanish government reduced feed-in tariffs, introduced new taxes and imposed caps on renewable energy production. These changes were seen as retroactive and violated Spain's commitments under various international investment treaties.
To date, 50 cases have been registered with the ICSID, making Spain the most frequent respondent in investment disputes. Most of the claims are brought under the Energy Charter Treaty (ECT) or various bilateral investment treaties (BITs) that Spain has with other countries. These treaties include provisions that protect foreign investors’ rights and investments and provide them with mechanisms to seek redress in case of disputes. Investors argue that the retroactive nature of the regulatory changes and their significant financial consequences violate these treaty provisions.
The Spanish State Attorneys have tried and failed through numerous appeals to have judgements overturned and even lobbied the European Commission to declare the awards as 'State Aid’ and therefore not payable under EU Law. To date 33 out of 50 cases have been concluded and Spain has lost 28 of them. Whilst the compensation awarded was in excess of $10Bn, these figures have been negotiated down to $1.4Bn. Once all cases are finally arbitrated the expected total will be around $2.4Bn.
Since Spain has refused to settle any claims, investors have begun punitive measures against the Kingdom including debt interest, adverse legal costs and foreign asset seizures.