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Extensive legal due diligence crucial to investment treaty win for renewable energy fund


Allen & Overy infrastructure clients awarded EUR112 million in dispute with Kingdom of Spain.

On 15 June 2018, an international arbitral tribunal rendered its Final Award ordering the Kingdom of Spain to pay EUR112 million (plus interest) to Allen & Overy clients Antin Infrastructure Services Luxembourg S.à.r.l. and Antin Energia Termosolar B.V. (together, Antin) in compensation for Spain’s breach of the Energy Charter Treaty (the ECT).
The dispute is one of dozens that have arisen under the ECT between Spain and international investors, who invested large amounts in the Spanish power sector, on the basis of a feed-in-tariff (FIT) system for electricity generated from renewable sources. Despite this regime having been the basis for numerous investments, Spain subsequently drastically altered it and, in the words of the Tribunal, “stripped [it] of its key features”. 
The Tribunal hearing the claim by Antin was constituted under the rules of the International Centre for Settlement of Investment Disputes (ICSID), which is an arm of the World Bank. It found that changes made by Spain to its renewable energy regime violated the investor protections of the ECT – specifically, the fair and equitable treatment (FET) standard – and that this breach caused loss to Antin. In assessing Antin’s legitimate expectations, the protection of which forms part of the ECT’s FET standard, the Tribunal took account of (i) the existing conditions at the time of the investment, (ii) the background of information that Antin had or should reasonably have had at the time of the investment and (iii) Spain’s conduct prior to, and at the time of, the investment. It saw evidence of extensive legal, regulatory and market due diligence done by Antin in advance of making its investment in the concentrated solar power (CSP) sector, including meeting with certain Spanish Government officers. It was as a result of this diligence that Antin chose to invest and it had legitimately concluded that the FIT regime applicable to CSP was unlikely to be fundamentally altered by future measures taken by the Spanish state. 
The Antin Tribunal held that it was “undisputed that the ECT’s FET standard includes the obligation to provide a stable and predictable legal framework for investments” and that this “comprises an obligation to afford fundamental stability in the essential characteristics of the legal regime relied upon by the investors in making long-term investments.” Although the applicable framework can evolve or be adapted in the public interest over time, Spain was not permitted to “radically” alter a regulatory regime “specifically created to induce investments in the energy sector” as it applies to existing investments. As such, Antin was entitled to damages, which the Tribunal assessed in the amount of EUR112 million, plus interest. The Tribunal also ordered Spain to pay 60% of Antin’s legal costs. 
This is the third victory for an Allen & Overy client in this series of investment arbitration cases against Spain. It follows the decision issued in May 2018 awarding Masdar Solar & Wind Cooperatief EUR64.5 million​ and the earlier Award, issued in May 2017, directing Spain to pay damages of EUR128 million to Eiser Infrastructure Limited. 
The ECT is a multilateral treaty, with fifty-three Signatories and Contracting Parties (including both the European Union and Euratom), and offers extensive protections to investments made in the energy sector. Allen & Overy has unrivalled expertise in relation to disputes arising under the ECT. We acted on the first-ever case under the ECT, as well as the first-ever collective claim under the Treaty. To date, we have acted in more ECT disputes than any other firm in the world. 
Our investment protection specialists advise clients on the structuring of investments, assist in negotiations with host States, and represent investors in investment disputes against States (including appearing as advocates).



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