ICSID support for Spanish RES investors may impact Greece

Setting a clear precedent in Spain and beyond, including Greece, where predetermined feed-in tariffs for renewable energy producers have been retroactively reduced, the International Center for the Settlement of Investment Disputes (ICSID) has delivered a decision against Spain, ordering the country to make a 128 million-euro compensation payment, plus interest, to Eiser Infrastructure Limited and its subsidiary Energia Solar Luxemburg.

The retroactive reductions of predetermined tariffs offered to investors in Spain for RES output are an infringement of Article 10 of the Energy Charter Treaty and its fair and equitable treatment regulation, according to the ICSID decision.

A large number of Spanish RES producers have filed cases claiming substantial compensation amounts for retroactive tariff reductions concerning existing RES units.

This ICSID development could impact measures included in Greece’s new deal, aiming to solve LAGIE’s (Electricity Market Operator) deficit problem. It includes feed-in tariff cuts for producers in exchange for bank loan extensions and interest rate reductions.

Spain’s energy ministry has announced that the government is considering appealing the ICSID decision, fearing it could prompt more affected RES investors to take related legal action and seek damages.

Eiser Infrastructure Limited had joined forces with Spanish energy investment company Elecnor and construction company Aries to develop solar energy production stations in the cities Ciuadad Real and Badajoj in 2007. These investments were worth a total of 935 million euros.

Favorable RES sector conditions, legislated in Spanish parliament before being overturned by the tariff cuts, served as an incentive for this investment decision.

Contrary to the ICSID, the Supreme Court in Spain, citing various reasons, has rejected claims made by RES producers. The court has noted that the unpredictability of actual RES market conditions justifies the tariff revisions.