Sevilla Beheer B.V. and others v. Kingdom of Spain

Case summary

At a glance

Parties: Sevilla Beheer B.V. and Cordoba Beheer B.V. (Netherlands) and 57 Spanish companies v. the Kingdom of Spain
Case no.: ICSID Case No. ARB/16/27
Forum and rules: ICSID Convention; ICSID Arbitration Rules 2006; place of proceeding Washington, D.C.
Treaty: Energy Charter Treaty, Article 10(1)
Tribunal: Dr. Raëd M. Fathallah (President), Professor Peter D. Cameron (replaced the late Professor Rudolf Dolzer in 2020), Professor Attila Tanzi
Sector: Renewable energy; solar photovoltaic plants
Outcome: Decision of 11 February 2022: jurisdiction upheld except over the 7% TVPEE tax. Spain breached the ECT unanimously through the retroactive claw-back, and by majority to the extent (if any) that the New Regime gives less than a 7% post-tax return. All other claims dismissed. Professor Cameron dissented in part.
Amount: Claimants' expert valued the loss at EUR 20.5 million (FCFE, 20 June 2014) and EUR 37.2 million (FCFE, 31 May 2018); claimed investment EUR 56.6 million. The Tribunal set the investment cost for the return test at EUR 52.2 million and dismissed the tax gross-up claim. Damages and costs were reserved for the Award.

The dispute

Two Dutch holding companies and 57 Spanish companies, all controlled by the Dutch investor Reinier Bouman, built five photovoltaic plants in Spain between 2007 and 2010 (Mahora, Villar de Cañas, Ronda, Matapozuelos and Fuentes de Año, about 8.8 MW in total). The plants were remunerated under the feed-in tariff regimes of RD 436/2004, RD 661/2007 and RD 1578/2008. Between 2010 and 2014 Spain adopted a series of measures: RD 1565/2010, RDL 14/2010, Law 2/2011, Law 15/2012 (the 7% TVPEE tax), RDL 2/2013, RDL 9/2013, Law 24/2013, RD 413/2014 and Order IET/1045/2014. Together these replaced the feed-in tariff with a "reasonable return" calculated for a standard installation. The claimants argued that this breached fair and equitable treatment (legitimate expectations, stability, reasonableness, proportionality, transparency) and the umbrella clause in Article 10(1) of the ECT. Spain raised an intra-EU objection and a tax objection to jurisdiction. On the merits it argued that Spanish law guaranteed only a reasonable return and that the investors had not carried out adequate due diligence.

Key holdings

The Tribunal unanimously upheld jurisdiction, except that it has no jurisdiction to decide whether the TVPEE (the 7% tax on electricity production) breached the ECT. ¶ 1080(i)
By majority, neither RD 436/2004, RD 661/2007 nor RD 1578/2008 contained a commitment to keep the feed-in tariff unchanged. Registration in the RAIPRE register was an administrative requirement that created no vested rights. Read together with Law 54/1997 and the judgments of the Spanish Supreme Court, the regulatory framework supported only a legitimate expectation of a reasonable return. ¶¶ 836–877
By majority, the claimants made their investment without paying specific attention to the risk of unfavourable regulatory change. Their advisers' reports dealt with administrative matters, not with the stability of the tariff regime. ¶¶ 886–898
By majority, the reasonable return that the claimants could legitimately expect for renewable energy projects in Spain was 7% after taxes. Whether the New Regime meets that rate is to be tested by an operational (lifetime) IRR, using an investment cost of EUR 52.2 million and the renegotiated operation and maintenance contracts. The parties were directed to prepare a joint IRR calculation. ¶¶ 995, 1000–1021
Unanimously, the New Regime's claw-back breached Article 10(1) of the ECT. The claw-back counts remuneration lawfully received before July 2013 against the new rate of return. The parties were directed to try to agree the compensation for this element. ¶¶ 903–907; ¶ 1080(ii)
By majority, the transparency and umbrella-clause claims were rejected. Spain had consulted stakeholders before adopting the New Regime, and general legislation and RAIPRE registration are not obligations "entered into" with an investor. The decision on reasonableness and proportionality was reserved until the IRR analysis is done. ¶¶ 935, 943, 952–958
The tax gross-up claim was dismissed as speculative, unproven and lacking causation. Damages (if any) and costs were reserved for the Award. Professor Cameron dissented in part, including on stability under the ECT, due diligence and the significance of RAIPRE registration. ¶¶ 1074–1082

Procedural history

1 August 2016ICSID receives the Request for Arbitration. It is registered on 12 August 2016.
7 February 2017The Tribunal is constituted: Dr. Raëd M. Fathallah (President, appointed by the ICSID Secretary-General), Professor Rudolf Dolzer and Professor Attila Tanzi.
13 December 2018Procedural Order No. 2 grants the European Commission leave to intervene as a non-disputing party, on condition that it undertakes to bear the costs. The Commission declines the undertaking, and its application is placed on the record.
18–22 March 2019Hearing on jurisdiction and the merits in Paris.
8 April 2020After Professor Dolzer's death, the proceeding is suspended. On 7 May 2020 the Tribunal is reconstituted with Professor Peter D. Cameron, who decides not to require the oral procedure to be recommenced.
22 September 2021The CJEU Komstroy judgment is admitted into the record, and the parties comment on it in October 2021.
11 February 2022Decision on Jurisdiction, Liability and the Principles of Quantum, with Professor Cameron's partial dissenting opinion.

Tribunal, counsel and experts

Decided by: Raëd Fathallah President — appointed by the institution
Peter D. Cameron Co-arbitrator — appointed by the claimant (replaced Professor Rudolf Dolzer on 7 May 2020; dissented in part)
Attila Tanzi Co-arbitrator — appointed by the respondent
For the claimant: Allen & Overy LLP
For the respondent: Abogacía General del Estado
Experts: Pablo T. Spiller (claimant) · Carlos Solé Martín (claimant) · Daniel Flores (respondent)