Foreign investors take legal action over Spanish solar cuts

HgCapital, NIBC and 12 others – represented by Allen & Overy – have slapped the government with a demand for international arbitration over last year’s retroactive cuts to Spain’s solar tariff regime. The investors have committed about €2bn to Spanish solar between them.

A group of 14 international investors have served the Spanish government with a demand for international arbitration over its December 2010 decision to retroactively change the tariff regime regulating investments in the country’s solar photovoltaic sector.

Law firm Allen & Overy is representing the group – which includes the likes of Ampere Equity Fund, HgCapital, Impax Asset Management and NIBC Infrastructure Fund – as it seeks compensation for last year’s retroactive cuts. The group’s claims are being made under the Energy Charter Treaty, “a multilateral investment treaty designed to protect long-term energy investments,” Allen & Overy said in a statement.

“In 2007, Spain put in place a tariff regime that was specifically designed to encourage investment in the PV [photovoltaic] sector. Thanks to this tariff regime and investors like our clients, Spain now possesses a state-of-the-art PV generation infrastructure. In short, Spain induced our clients to invest billions of euros in the PV sector and, once it received the benefit of that investment, it simply reneged on its end of the deal,” Allen & Overy’s Stephen Jagusch explained in a statement.

The 14 international investors have spent about €2 billion between them to build or acquire over 270 megawatts of PV projects in Spain. But with elections taking place on Sunday that will almost certainly spell the end of the current socialist government, the investors’ action is really targeting the new conservative government, something Jagush recognises.

“It is hoped that the new government that? will be formed after this weekend’s election will restore their confidence in Spain,” he commented. According to Allen & Overy, the investors tried to resolve the dispute amicably with the current socialist government, but the authorities rejected an amicable settlement in June 2011.

The investors seeking arbitration collectively manage $30 billion on behalf of more than 70 pension funds and other institutional investors, Allen & Overy pointed out.