Summary

INTRODUCTION AND PARTIES

1. This case concerns a dispute submitted to the International Centre for Settlement of Investment Disputes ("ICSID" or the "Centre") on the basis of the Energy Charter Treaty, which entered into force on 16 April 1998 with respect to the Grand Duchy of Luxembourg, the Kingdom of Sweden and the Kingdom of Spain (the "ECT"), and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which entered into force on 14 October 1966 (the "ICSID Convention").

2. The claimants are Hydro Energy 1 S.à r.l. ("Hydro Energy"), a private limited company (société à responsabilité limitée) incorporated under the laws of Luxembourg, and Hydroxana Sweden AB ("Hydroxana"), a private limited liability company (Aktiebolag) incorporated under the laws of Sweden (together, the "Claimants").

3. The respondent is the Kingdom of Spain ("Spain" or the "Respondent").

4. The Claimants and the Respondent are collectively referred to as the "Parties".

The Parties' representatives and their addresses are listed above on page (i).

5. This dispute relates to measures implemented by the Respondent that modified the regulatory and economic regime applicable to producers of hydropower generation energy, which allegedly negatively impacted the Claimants' investment (equity and debt interests) in various Spanish companies that own and operate thirty-three hydropower generation plants in Spain with a total installed production capacity of 106.788 megawatts ("MW").

6. The Claimants allege that Spain has breached its obligations under Article 13 of the ECT by means of the indirect expropriation of their investment. They also submit that the Respondent has failed to comply with the following obligations under Article 10(1) of the ECT: (a) to accord fair and equitable treatment ("FET"), (b) not to impair by unreasonable or discriminatory measures the management, maintenance, use, enjoyment or disposal of the Claimants' investment, and (c) to accord the most constant protection and security ("MCPS"). The Claimants seek compensation for damage caused as a result of the Respondent's violations of the ECT amounting to EUR 132.1 million.

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DECISION

770. For the reasons set out above:

(1) the Tribunal declares that it has jurisdiction over the Claimants' claims in the present arbitration;

(2) the Tribunal dismisses the Claimants' claim under ECT, Article 13(1);

(3) the Tribunal declares that the Respondent might (or would) be in breach of ECT, Article 10(1), if and to the extent that the remuneration of each of the plants in the Ondina and Xana portfolios failed to accord with a reasonable post-tax rate of return in the small-hydro market in Spain on the basis of WACC plus 1%, with the risk-free rate being the Spanish 10 year bond rate of 4.398%;

(4) the Tribunal accordingly directs the Parties to endeavour to agree on the bases in Section VIII B hereof (i) an agreed post-tax reasonable rate of return calculated using the WACC as at June 2013; and (ii) agreed post-tax holding IRRs for each of the plants;

(5) the Tribunal directs the Parties to report to the Tribunal within 60 days hereof whether agreement has been reached, and if not, on the principal areas of disagreement;

(6) the Tribunal will give such further directions as may be necessary;

(7) the Tribunal reserves all consequential matters, including interest (if any) and costs, to a further Decision or final Award.

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Lord Collins of Mapesbury, LL.D., F.B.A., President
Professor Rolf Knieper, Arbitrator
Mr Peter Rees, QC, Arbitrator