ESPAÑOL | ENGLISH | DEUTSCH | 日本語 |

Share this post

This week, the first-ever international arbitration award issued with reference to the 2010 reforms by the Spanish Government in the field of photovoltaic energy have been published, which have led to the interposition of arbitration claims against the Kingdom of Spain by manifold affected foreign investors, under the Energy Charter Treaty (hereinafter, “ECT”).

The Arbitral Tribunal dismisses the complaint and understands that no international legal principle exists whereby a nation is banned from taking regulatory measures with immediate effect with regard to current situations (unless specific commitments exist). Likewise, it instructs that although the return on the investment could have been seriously affected, said impact is not an expropriation in itself; the standard of fair and equitable treatment was not violated, and the legitimate expectations of the plaintiff investors were not frustrated.

In order to understand this information that has been diffused by the media over the last few days, as a consequence of a press release issued by the Spanish Government, several aspects must be taken into consideration:

1. The ECT is a treaty stating a general legal framework in terms of energy, with the purpose of facilitating the access to international markets under standard trade conditions and, in general, achieving an open and competitive market for energy materials and products.

2. The Contracting Parties of ECT are States and Regional Economic Integration Organizations that have agreed to be linked through ECT and for which it is in force.

3. In Article 26 of ECT, on dispute resolution between one Contracting Party and an investor of the other Contracting Party, the ECT foresees three actions which the affected investor can resort to when three months have elapsed and it has not been possible to resolve the dispute:

a) through ordinary or administrative courts of the Contracting Party involved in the dispute (inadvisable)

b) in accordance with a dispute resolution procedure previously agreed (unlikely)

c) an arbitration procedure, which in turn can be of three types:

i. before the International Centre for the Settlement of Investment Disputes (ICSID) (hereinafter, “ICSID”) according to the ICSID Convention, as long as both the Contracting Party of the investor and the Contracting Party in dispute belong to the same group.

ii. before a single international arbitrator or an ad hoc court of arbitration established by virtue of the United Nations Commission on International Trade Law Arbitration Rules (hereinafter, “UNCITRAL Arbitration Rules”).

iii. before the Arbitration Institute of the Stockholm Chamber of Commerce, according to its arbitration rules (hereinafter, “SCC”)

4. The main differences between the ICSID, UNCITRAL, and SCC arbitrations are that, while in ICSID and SCC there is an arbitral institution which manages arbitral proceedings, in UNCITRAL there are only the parties to the dispute and the Arbitral Tribunal and there is no centre or institution which performs supporting functions.

5. And, while the ICSID jurisdiction covers the disputes arising between the Contracting State and the national of the other Contracting State, in such a way that it is always of a mixed nature (investor-State), the SCC manages both private arbitral procedures (between individuals) and arbitral procedures between States and individuals.

6. However, in all of the above, the Arbitral Tribunal (consisting of an odd number of arbitrators, commonly three) is independent. Arbitrators are often renowned and prestigious jurists chosen either by the parties or by the arbitral institution.

7. And the decision of the Arbitral Tribunal, the award, is final (consequently, there is no option for appeal) and binding (of obligatory compliance). In addition, the arbitration award is confidential (its content shall not be revealed without both parties’ consent) and it does not create a precedent (in such a way that arbitrators of other arbitral tribunals are not obliged to respect the decisions taken in past arbitration awards).

8. The Arbitral Tribunal decision is adopted by majority, and if this is not possible, by the President of the Tribunal. The arbitrators may formulate an individual vote, whether they agree with the majority or not, or express a statement of their dissent, by a vote against.

That said, the first international arbitration award resolving in favour of the Kingdom of Spain, dismissing the request for arbitration filed by the Dutch company Charanne B.V. and the Luxembourg company Construction Investments S.A.R.L., considering that regulatory changes in the field of renewable energy did not violate any legitimate expectation of the investors, must be treated with caution since it has been issued with a dissenting vote from one of its arbitrators and does not create a precedent for other ongoing arbitral proceedings.

For more information, please contact:

Carla VILLAVICENCIO

cvg@vila.es

Print Friendly, PDF & Email