DECISION ON JURISDICTION, LIABILITY AND DIRECTIONS ON QUANTUM
1. This case has been submitted to the International Centre for Settlement of Investment Disputes ("ICSID" or the "Centre") under the Energy Charter Treaty, which entered into force for the Kingdom of Spain and the Federal Republic of Germany on 16 April 1998 (the "ECT")1 and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which entered into force on 14 October 1966 (the "ICSID Convention").
2. It concerns a dispute between two German investors and the Kingdom of Spain arising out of measures implemented by the Government of Spain modifying the regulatory and economic regime of renewable energy projects.
III. PROCEDURAL HISTORY
A. REGISTRATION AND CONSTITUTION OF THE TRIBUNAL
5. On 16 April 2015, the Claimants submitted a Request for Arbitration against Spain (the "RfA").
6. On 8 May 2015, the Secretary-General of ICSID registered the RfA in accordance with Article 36.3 of the ICSID Convention and so notified the Parties.
7. On 9 July 2015, the Parties informed the Centre of their agreement as to the number of arbitrators and the method for the Tribunal's constitution. Pursuant to this agreement, the Tribunal shall consist of three arbitrators; one appointed by each Party and the third, the presiding arbitrator, to be appointed by agreement of the Parties. If no such agreement could be reached by 7 September 2015, either Party could request the Secretary-General to appoint the President after consulting both Parties through a ballot procedure. As further agreed, the presiding arbitrator need not necessarily be selected from the Panel of Arbitrators.
8. On 10 July 2015, the Centre invited the Parties to clarify certain aspects of the proposed ballot procedure. The Claimants and the Respondent provided such clarifications by communications sent on 15 and 16 July, respectively.
9. In accordance with the Parties' agreement, the Claimants appointed Dr. Horacio A.
Grigera Naón, an Argentine national, on 17 July 2017, and the Respondent appointed Ms. Loretta Malintoppi, an Italian national, on 27 July 2017, as arbitrators.
10. On 8 September 2015, the Claimants informed the Centre that no agreement had been reached. They thus requested the Secretary-General to propose a ballot of possible candidates as per the Parties' agreement. On 17 September 2015, the Secretary-General sent such ballot to the Parties.
11. On 5 October 2015, the Centre informed the Parties that the ballot procedure had not resulted in any mutually agreeable candidate, and that the Secretary-General would proceed with the appointment of the presiding arbitrator pursuant to the default method agreed by the Parties.
12. By letter of 28 October 2015, the Secretary-General communicated that she intended to appoint Judge James R. Crawford and invited the Parties to send their comments, if any, by 4 November 2015. On 5 November 2015, after not having received any comments, the Secretary-General informed the Parties that the Centre would proceed with the proposed appointment of Judge Crawford as President of the Tribunal.
13. On 6 November 2015, the Secretary-General notified the Parties that all three arbitrators had accepted their appointments and that the Tribunal was therefore deemed to have been constituted on that date in accordance with Rule 6(1) of the ICSID Rules of Procedure for Arbitration Proceedings (the "Arbitration Rules"). Mr. Francisco Grob, ICSID Legal Counsel, was designated Secretary of the Tribunal. Mr. Grob's legal and professional background was communicated to the Parties by a letter sent on 26 May 2015.
B. THE FIRST SESSION
14. In accordance with ICSID Arbitration Rule 13(1), the Tribunal held a first session with the Parties on 10 December 2015, by teleconference.
15. Following the first session, on 29 December 2015, the Tribunal issued Procedural Order No. 1 recording the agreements of the Parties on procedural matters and the decisions of the Tribunal on disputed issues. Procedural Order No. 1 provides, inter alia, that the applicable Arbitration Rules are those in effect from 10 April 2006 and the procedural languages would be English and Spanish. In addition, Procedural Order No. 1 set out a schedule for the written and oral proceedings.
C. THE EUROPEAN COMMISSION'S FIRST APPLICATION TO INTERVENE
16. On 16 February 2016, the European Commission ("EC") submitted an Application for Leave to Intervene as a Non-Disputing Party pursuant to Article 37.2 of the ICSID Arbitration Rules ("EC's First Application"). The EC sought to intervene on the question whether the Tribunal had jurisdiction over intra-EU investment disputes under the ECT.
17. Following observations from both Parties, the Tribunal issued Procedural Order No. 2 ("PO2"), dated 23 May 2016. The Tribunal found the application premature as the Respondent had not raised any jurisdictional objections at that point, nor had it filed its Counter-Memorial. In the Tribunal's view:
Due to the absence so far of submissions by the Respondent on the very matter on which the Commission seeks to intervene, the Tribunal considers that it is not in a position to determine whether the Commission's intervention would assist the Tribunal in the terms of ICSID Arbitration Rule 37(2)(a). In the Tribunal's opinion, this criterion can only be sensibly assessed after the Respondent has had the opportunity to address the Tribunal's jurisdiction (i.e. after the Counter-Memorial, due on June 15, 2016).4
18. Accordingly, the Tribunal rejected the EC's First Application without prejudice to a further application by the EC following the filing of the Counter-Memorial.
D. THE PARTIES' FIRST ROUND OF WRITTEN SUBMISSIONS
19. On 3 March 2016, the Claimants filed their Memorial on the Merits ("Cl. Mem.") accompanied by the witness statements of Mr. José Alberto Ceña Lázaro, Mr. Andreas Helber, Mr. Errol G. Schulz ("CWS-ES"), and Mr. Matthias Taft ("CWS-MT"), and by KPMG's First Expert Witness Report ("KPMG First Regulatory Report") and Damages Expert Report ("KPMG First Damages Report").
20. On 15 June 2016, the Respondent filed a Counter-Memorial on the Merits and Memorial on Jurisdiction ("Resp. C-Mem."), accompanied by the witness statement of Mr. Juan Ramón Ayuso and Econ One's Expert Report ("Econ One First Report").
E. DOCUMENT PRODUCTION AND ADMISSIBILITY OF NEW DOCUMENTS
21. On 12 September 2016, each Party filed a document production application as per Section 15.2.5 of Procedural Order No. 1.
22. On 3 October 2016, the Tribunal issued Procedural Order No. 3 concerning the Parties' document production applications.
23. On 18 November 2016, the Respondent requested permission to introduce the final award rendered on 17 July 2016, in the case Isolux Netherlands, B.V. v. Kingdom of Spain, SCC Case V2013/153 (the "Isolux v. Spain (Award)").
24. Following the Tribunal's invitation, the Claimants filed their observations on 2 December 2016. They objected to Respondent's application, contending that it was inconsistent with Respondent's refusal to produce other ECT decisions and awards during document production and also with the Tribunal's conclusion that such rulings were not relevant or material to this case. In addition, the Respondent would breach the presumed confidentiality of the Isolux arbitration proceeding if it was allowed to introduce that award without the consent of the Claimants in that case, Isolux Netherlands BV.
25. On 21 December 2016, the Tribunal issued Procedural Order No. 4 concerning the Respondent's 18 November application. It held that it is not for it to decide whether the Respondent should or should not submit a certain authority in support of its case; as a general rule, no prior leave of the Tribunal is required for submitting an authority with scheduled pleadings provided that the applicable rules of procedure are otherwise met.
Nor is it for the Tribunal to enforce alleged confidentiality obligations involving a non-party to the proceeding:
Without prejudice to the discretion of this Tribunal to decline ordering production of a confidential document or otherwise exclude from the file information that is to be kept confidential between the parties, it is generally for the person by whom such confidentiality is owed to seek any necessary consent to the release of protected information and for the person to whom such confidentiality is owed to ensure that such information is not improperly released and to seek appropriate remedies if need be.5
26. The Tribunal therefore denied the Respondent's application, without prejudice to the right of either Party in the course of pleadings to cite decisions on file or in the public domain which they judge to be relevant to this case, and the right of the other Party to respond thereto.6
27. In the meantime, on 13 December 2016, the Claimants filed an application by which they challenged the Respondent's compliance with Procedural Order No. 3. The Claimants asserted that the Respondent had failed to conduct proper searches for, or to produce complete copies of, documents which the Tribunal ordered be produced.7
28. By invitation of the Tribunal, the Respondent filed comments on Claimants' application on 20 December 2016.
29. On 23 January 2017, the Tribunal issued Procedural Order No. 5 concerning the Claimants' 13 December application. Among others, the Tribunal ordered the Respondent to produce the requested documents concerning the work performed by Roland Berger ("RB") and Boston Consulting Group ("BCG") for the Respondent as well as those relating to Invest in Spain's engagement of German international business development agency, AHP Gruppe.
F. THE EUROPEAN COMMISSION'S SECOND APPLICATION TO INTERVENE
30. On 17 January 2017, the EC submitted a Second Application for Leave to Intervene as a Non-Disputing Party pursuant to Article 37.2 of the ICSID Arbitration Rules ("EC's Second Application").
31. After receiving observations from the Parties, the Tribunal issued, on 4 April 2017, Procedural Order. No. 6, by which it rejected the EC's Second Application ("PO6"). The Tribunal was not convinced that a submission by the EC would add to the sum total of available information as to intra-EU jurisdiction under the ECT in the terms of Rule 31 May 2019 (hereinafter "NextEra v. Spain (Award)"), RL-0122, 9REN Holding S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/15/15, Award, 31 May 2019 (hereinafter "9REN v. Spain (Award)"), RL-0123.
7 These documents concerned, among others, presentations made by Spanish authorities regarding the Spanish legal framework for renewable energy; Invest in Spain's engagement of German international business development agency, AHP Gruppe; and work performed by Roland Berger and Boston Consulting Group for the Respondent in relation to MO IET/1045/2014.
37(2)(a), while it would most likely cause additional costs to the Parties. In the Tribunal's view:
[...] A non-disputing party permitted to file a submission under that Rule does not thereby become a party to the proceedings, and the Tribunal has no jurisdiction to award costs against it. No doubt permission to file might be made subject to a prior condition of the provision of security for costs, but the Tribunal understands that the Commission, faced with such a condition, has declined to file or to provide security.8
[...] The questions [on which the EC seeks to intervene] have been extensively discussed in a number of published awards, and have been well ventilated in the literature. The parties in the present case are fully capable of presenting the legal issues at stake. 9
G. THE PARTIES' SECOND ROUND OF WRITTEN SUBMISSIONS
32. The Claimants filed a Reply on the Merits and a Counter-Memorial on Jurisdiction ("Cl. Reply") on 6 February 2017, accompanied by the second witness statement of Mr.
José Alberto Ceña Lázaro and KPMG's Rebuttal Expert Witness Report ("KPMG Second Regulatory Report") and Complementary Report on Damages ("KPMG Second Damages Report")
33. The Respondent filed a Reply on Jurisdictional Objections and a Rejoinder on the Merits ("Resp. Rej.") on 7 April 2017, accompanied by the witness statement of Mr. Daniel Lacalle and the second witness statement of Mr. Juan Ramón Ayuso ("RWS-JRA2"), and by Econ One's Second Expert Report ("Econ One Second Report").
34. On 24 May 2017, the Claimants filed a Rejoinder on Jurisdiction ("Cl. Rej.").
629. For these reasons, the Tribunal finds, by majority:
(a) that the European state aid regime and the ECT apply concurrently to the investment and form part of the applicable law;
(b) that the Claimants did not have a legitimate expectation that the Special Regime subsidies, notably in terms of RD 661/2007, would continue to be paid for the lifetime of its Plants;
(c) that in the circumstances, the clawing back by Spain, in and after 2013, of subsidies earlier paid at levels in excess of the amounts that would have been payable under the Disputed Measures, had they been in force in previous years, was in breach of the obligation of stability under Article 10.1, first and second sentences, of the ECT;
(d) that there was no other breach of the ECT;
(e) that all other claims must be rejected.
630. The Parties shall seek to reach agreement on the impact of the unlawful retroactive application of the Disputed Measures, on the basis that those measures were otherwise consistent with the ECT.
631. If the Parties do not, within 3 months of the date of this Decision, reach agreement on the amount payable in this respect, either of them may request the Tribunal to decide the outstanding issues in dispute, in accordance with a prompt briefing schedule. If the Parties do reach agreement on the amount due, they should report this to the Tribunal in order to enable it to issue an Award incorporating this Decision and dealing with any residual issues identified, including costs, thereby terminating the proceedings. The Tribunal will deal with costs issues in that Award.
632. Mr. Grigera Naón disagrees with these conclusions, insofar as they hold Spain not responsible for full compensation for the New Regime. In his view, Spain breached Article 10.1, first and second sentence, of the ECT, in 2013 by imposing that regime upon the Claimants' Wind Farms, which were already well established and had legitimate expectations as to the maintenance of the Special Regime. A statement of the reasons for this dissent is attached.