How financial investors, law firms and arbitrators are benefiting from the boom in investment arbitration in Spain
Over the last 10 years, Spain has had more investment arbitration cases pending than any other country. It has received a total of 51 lawsuits, of which 27 have already been decided, 21 in favour of the investor. This means that investors have won in eight out of ten cases. According to the Spanish government, the total claims of foreign investors amount to almost 8 billion euros. So far, Spain has been ordered to pay more than €1.2 billion in compensation for the lost cases, which is equivalent to the country’s total spending to fight the climate crisis – or five times what it will spend in 2021 to fight energy poverty. The longer the proceedings continue, the more money from the treasury is at stake, not only to pay the investors the amounts resulting from the arbitration awards, but also the lawyers' and experts' fees, the administrative costs of the arbitration board and the fees of the arbitrators.
All lawsuits were filed under the Energy Charter Treaty (ECT), an international trade and investment agreement with more than 53 member states in Europe and Asia. A large number of stakeholders consider the ECT obsolete (including the European Commission and EU Member States).
The ECT provides strong protection for foreign investments in the energy sector, including oil, gas and coal, from government interventions that reduce the investor's profits. Spain is noteworthy because all the lawsuits concerned were brought by foreign investors in the renewable energy sector. Generous incentives granted by the Spanish government in 2007 attracted many domestic and foreign investors. In the following years, incentives were revised downwards. These policy changes were challenged by foreign investors under the EC Treaty. However, a close examination of the lawsuits against Spain shows that the ECT benefits only transnational investors and specialised law firms at the expense of the Spanish solar dream.
