Spain’s renewable energy case undermines EU funding 2023

Renewable energy investors who lost Spanish subsidies are going to court in London to attempt to get $125 million from the government, a decade-long battle that might affect EU clean energy finance.

Once the U.S. established a bill encouraging domestic green technology, investors will monitor the outcome. Analysts argue the Inflation Reduction Act is already deterring renewable energy investment from EU nations like Spain, making the 27-nation union less competitive worldwide.

The EU’s executive arm, the European Commission, has proposed state assistance and green investment guidelines. Such modifications would not impact ongoing court proceedings.

This week’s London Commercial Court litigation includes Dutch and Luxembourg businessmen who invested millions in a southern Spain solar facility in 2011. With the 2008 financial crisis, Spain canceled renewable energy subsidies without warning.

It lost 20 times without paying. EU backs Spain

Around 50 countries have sued Spain for retroactive modifications. According to U.N. records on foreign investment disputes, it has lost over 20 instances without paying anything. EU supports Spain.

“Those renewable investors—multibillion-dollar companies—are extremely concerned about the attitude of Spain and Europe looking forward,” said Nick Cherryman, one of the attorneys leading the case against Spain. “Why take chances investing in Europe given the track record?”

According to Nikos Lavranos, a Netherlands-based investment arbitration and EU law specialist, Spain, Venezuela, and Russia have the greatest outstanding obligations for commercial treaty violations.

These complaints say that Spain violated the Energy Charter Treaty, a legally binding pact between 50 nations to safeguard energy corporations from improper government involvement.

Environmentalists have criticized the pact for safeguarding fossil fuel investment since financiers may sue over regulatory changes to reduce damaging projects. Most Spanish instances include renewable energy.

Lavranos claimed the EU is hurting itself by backing Spain. Investor confidence is shaken since you can’t trust them to keep their promises.”

He also questioned how putting investors in the dark about renewable energy output aligned with recent EU measures like the Green New Deal, carbon neutrality by 2050, and subsidy reduction.

Lavranos called it contradictory.

The World Bank-backed International Centre for Settlement of Investment Disputes arbitrated a lawsuit between Spain’s investors and the government in 2013.

Spain has to pay investors for subsidy changes in 2018. Spain refuses to pay more than $1 billion, citing EU laws.

Spain’s Ecological Transition Ministry claimed the payments “may be contradictory to EU legislation and constitute illegal state aid.” When instructed to pay, the government informs Brussels but argues “Spain cannot pay before the commission’s ruling, thus it is scrupulously following with its legal obligations.”

The European Commission stated EU law supersedes the Energy Charter Treaty in conflicts between member states including the Netherlands, Luxembourg, and Spain. The commission says “the first view is that the arbitration result would constitute state aid.”

Cherryman, investors’ lawyer, said the EU believes it “should be superior to international treaty law.” His team is attempting to grab part of a $1 billion compensation handed to Spain for a 2002 oil disaster after waiting a decade and given the EU stance.

Spain will argue in London on Wednesday that investors should not be permitted to take those assets in lieu of unpaid compensation.

Spanish international arbitration lawyer José Ángel Rueda, who has represented many renewable energy investors against Spain, said Spain’s credibility is at stake. He added other EU states like Germany and Hungary had paid up after international conflicts to retain a favorable image.

Spain is different. A serious nation was expected. Rueda said the prizes remain unpaid. Investors can understand that Spain’s rule of law may be unreliable.

After years of legal battles, the EU is mulling a coordinated energy treaty exit, which would not affect existing challenges.

Spain’s Ecological Transition Ministry stated that the treaty cannot be modernized to meet Paris accord and European Green Deal goals.

The European Commission called withdrawal “the most sensible path forward.”

Cherryman suggested investors may just look across the Atlantic.

“America was agile and produced highly favorable legislation to attract renewable investment,” he added. “They’ll respect my investment. I may risk going to Europe, Spain.”

Cherryman said losing money for renewables, which are “a benefit for everybody,” was the risk. We want renewables invested in and a cleaner, safer future for our children.”

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