A host of international investors have been given a ray of hope after UK-based fund manager EISER Infrastructure was awarded €128 million in compensation from the Spanish government as a result of its cuts to the solar sector.
The Washington-based International Centre for Settlement of Investment Disputes reached its ruling against the government on Friday, with EISER becoming the first company to win a case against Spain related to the country’s retroactive cuts to solar tariffs in 2013 and 2014. The fund manager will receive 43 percent of the €300 million it was seeking from the action.
EISER’s case surrounds its investments beginning in 2007 and consolidated in 2011 in three solar thermal plants in Spain, representing total investments of about €935 million and a combined capacity of 150MW.
However, in its bid to trim public finances in the midst of the Eurozone crisis, the Spanish government twice wielded swingeing retroactive subsidy cuts to the renewable energy sector, prompting widespread industry anger and a host of legal actions. There are still several cases to be decided by the ICSID, including those pursued by Antin and RREEF.
The Spanish government, in denouncing the award as “excessive”, said the ruling should not be assumed to constitute a binding precedent for the other cases being processed. It pointed to previous rulings from its own Court of Arbitration which ordered Danish firm Charanne to pay €1.2 million following its loss of a similar case in January 2016.
The Ministry of Energy said it is considering appealing the award and added that the court recognised Spain “faced a legitimate public policy problem with its tariff deficit” at the time and the court did not “dispute that it was appropriate for the Spanish authorities to adopt reasonable measures to deal with the situation”.
The court added though that Spain did not comply with its European Commission obligations “to give investors fair and equitable treatment”. While a state has a right to regulate its local affairs, the court ruled, this right is not “unlimited and must have its limits”. It also rejected the Spanish government’s argument that EISER should have factored the cuts into its risk assessment before investing.
EISER was originally formed under the management of Dutch bank ABN AMRO in 2005. It became independent in 2010 and last year sold a portfolio including Belfast City Airport, the UK-based ESP Utilities and Italian waste treatment business Herambiente to 3i.
EISER and lawyers from Allen & Overy representing the firm had not responded to requests for comment by press time.