'Don’t pay out': EU backs Spain in renewables subsidy row case

The European Commission has ordered Spain not to pay out on a damages award over cuts to its renewable energy subsidies regime as it would constitute illegal state aid, a decision with implications for investors including E.ON and NextEra.

The Commission issued its decision after conducting an in-depth investigation into a €101m international arbitration award won against Spain by French private equity firm Antin, which had invested in the country’s renewables sector in the early 2000s.

During that period, Spain boasted one of the most generous support schemes for renewable energy projects, with Antin among the many international developers enticed to invest.

However, in 2008, with its economy rocked by the global financial crisis that same year, Spain began to make a series of retroactive cuts to the support mechanism. That culminated with the state abolishing its feed-in tariff system in 2013 and replacing it with a support scheme based on a “reasonable return” on investment.

Over 50 foreign investors in Spain’s renewables sector responded by filing international arbitrations against Spain collectively worth €10.6bn ($11.5bn). Most of those invoked the Energy Charter Treaty (ECT), a multilateral agreement that guarantees protections for investors from one signatory country when they invest in another.

The International Centre for Settlement of Investment Disputes, an arm of the World Bank in Washington, DC, has administered the vast majority of those arbitrations. That included the ECT claim brought by Antin, which secured its €101m award, plus interest, in 2018.

Spain referred that award to the Commission, sparking its in-depth investigation. In its decision, the Commission said that the arbitration award and its payment constitute illegal state aid. State aid is prohibited in the bloc unless the Commission approves it.

Spain must continue to resist attempts to enforce the award, said the Commission, in addition to not voluntarily paying out on the award.

Antin, along with other investors that have won similar awards against Spain, has embarked on numerous efforts to enforce it in international courts – including by attempting to seize land Spain owns for an international private school in Notting Hill, London.

In a press release, Spain said it welcomed the decision and confirmed its “strong opposition” to the recognition of similar awards, saying it will invoke the decision in the various foreign jurisdictions where it is facing enforcement proceedings.

Of the arbitrations brought against Spain over its renewables subsidies, the government said 43 have been ruled on, with ten successful and €1.5bn awarded in compensation.

The Commission said that Antin can challenge the decision and it has reportedly confirmed that it will do so.