Renewable Energy Arbitrations Against the Kingdom of Spain

The problem

The Kingdom of Spain was in investment treaty arbitrations with Mathias Kruck y Otros/DSG and Soles Badajoz, two photovoltaic (PV) generators. The two applicants invested under the terms of a 2007 special regime which guaranteed payments to new renewable generators. The applicants believed the energy sector reforms that the Kingdom subsequently pursued in 2012 amounted to expropriation as they resulted in reduced payments to producers of electricity from PV energy sources. The sector reforms were introduced in response to a sector wide crisis, resulting in part from significant over-supply (energy demand between 2005 – 2012 increased by 2 percent while supply grew by 39 percent).

How we helped

Castalia provided advisory services to Union Temporal de Empreses (UTE) that had been awarded the role of expert witness to the Kingdom of Spain. We showed that the behavior of the Kingdom of Spain constituted standard, predictable and legitimate market reform. We considered case studies of Chile, Indonesia, Brazil, the Philippines and California as benchmarks. In each of those countries, legitimate and necessary sector reforms, often carried out in order to address a systemic crisis, resulted in some changes to what sector participants believed were their entitlements stemming from regulations. We concluded that the reforms undertaken by the Kingdom of Spain, from the perspective of the legitimate expectations of investors, were in line with the principles of the original policy as well as international regulatory practice.


Castalia argued that investors could legitimately expect that in an electricity sector crisis, national authorities would take measures to stop the crisis and that this was what the Spanish regulator had done. An approach that regulators frequently take is to adjust tariffs or revenue using rate of return regulation, which the Spanish regulator had done. While our analysis contributed to the Kingdom’s case, the arbitrators found that the reforms were a breach of the investors’ rights and awarded compensation.

The client


Mac Group

Our team

Alex Sundakov

Alex Sundakov

Executive Director

How can we help you?

How can we help you?