EU could aid Spain in its many renewable reform legal cases

The EU is considering backing the Spanish government against investors in the renewable sector in legal disputes going through international arbitration.

Madrid faces 20 outstanding cases at the World Bank’s International Centre for Settlement of Industrial Disputes (ICSID) over controversial reforms made in 2011 to the country’s renewables subsidies.

The claims were brought under the Energy Charter Treaty after the Spanish government ended its generous support for renewables and required investors to return subsidies.

If the EU rules the feed-in system amounted to illegal state aid, recipient companies would be required to repay 18 months’ worth of subsidies.

An EU ruling against investors would damage confidence in the Spanish renewable industry, which has been struggling since the policy reversal.

No new wind capacity was added in the first six months of the year as investors have shied away.

“There have been discussions with the EU to see whether the Spanish feed-in tariff could be viewed as state aid and, therefore, not compatible with EU law,” said Charles Kaplan of lawyers Orrick Rambaud Martel, which is representing German company SolEs Badajoz.

In August, SolEs Badajoz registered against the latest case against Spain at ICSID.

A spokesman for the European Commission’s competition section said: “The Commission’s assessment is ongoing. We cannot at this stage prejudge its outcome or the timing of a decision.”

“It is more than likely that the EU Commission would request the arbitral tribunal’s permission to intervene as a third party, as it did in many previous cases,” said Dr Adnan Amkhan Bayno, head of arbitration specialists Mena Chambers and former head of the legal affairs department of the Energy Charter Secretariat.

Precedent for the EU preventing compensation from being paid in such situations can be found in the case of Belgium’s Electrabel against the Hungarian state, over termination of a power purchase agreement. The claim was dismissed in 2012.

Even if the EU sides against the investors, each case normally lasts for up to two years. This means a conclusion of the first claim, which was registered in November 2013, should be published within months.

It will be years before the final claim is resolved, however. The existence of overhanging cases will make it more difficult for Spain to attract the investment it requires if it is to meet its EU renewable targets for 2020.

The Spanish industry and energy ministry did not reply to a request for comment. jon.stibbs@icis.com