Summary

Horacio A. Grigera Naón - Dissenting Opinion

BayWa r.e. Renewable Energy GmbH and BayWa r.e. Asset Holding GmbH and Kingdom of Spain (ICSID CASE No. ARB/15/16)

1. This dissenting opinion is limited only to findings and conclusions in the Majority Decision on Jurisdiction, Liability and Directions on Quantum (the "Decision") starting at the Decision's para. 456 regarding the Claimants' claim based on the fair and equitable standard (the "FET") under Article 10.1 of the Energy Charter Treaty (the "ECT"). More specifically, I dissent with the Decision's reasons and determinations according to which the Claimants are only entitled to damage compensation for what the Decision characterizes as "...the retroactive reduction in the allowed return....", and not to full compensation for the life of the Claimants' facilities, and the basis to establish such compensation. Therefore, I also disagree with the analysis, conclusions and way forward on quantum of damages set forth in paras. 612-617 of the Decision.

2. However, to avoid misunderstanding as to the scope of this dissent, I share: a) the Decision's conclusion at paras. 483 and 484 that a 25 year-life is appropriate for Wind Farms; b) the analysis of and conclusions on the protection and security Claimants' claim at the Decision's paras. 528-534; and c) the Decision's analysis and conclusions regarding the tax gross-up claim set forth at paras. 618-628 of the Decision. Further, although certain coincidences in the approach and reasoning in this dissent and in the Decision may be noticeable, this does not detract from substantial disagreements evidenced in the text and conclusions that follow. The undersigned believes that only reading together this dissent and the Decision's paragraphs covering the FET claim allows to adequately identify such areas of disagreement even where the Decision does not specify that it is rendered by majority.

3. A FET analysis requires a balancing exercise between Claimants' rights under the legal framework spanning 1996-2012 (the "Special Regime") and the regime put in place through legal enactments by the Spanish Government in 2013-2014 (the "New Regime").

4. It is common ground between the Parties that the Special Regime could be subject to regulatory changes. The issue is the balance to be struck between the rights granted to the Claimants and accompanying expectations of stability, gain and profit through concrete and specific provisions under the Special Regime and the New Regime regulations curtailing or eliminating such rights or baffling those expectations. Such balance requires a weighing of different factors along notions of reasonableness and proportionality. To this exercise I now turn.

5. One first relevant factor to be accounted for in this exercise is that the Claimants' rights under the Special Regime and accompanying expectations of stability, gain and profit originate (just considering the Special Regime's concrete legal provisions) in specific rules of law having mandatory force of their own. Therefore, without denying the importance of general representations or statements generating investors' legitimate expectations, the analysis should be, first and foremost, centered on the imperative legal provisions at the heart of the Special Regime.

6. Expectations arising out of such Special Regime's legal rules are necessarily legitimate among other things because, on the contrary, the very function of rules of law - particularly in democratic societies - to create areas of predictability and security orienting human action would be defeated. They are also objective, since they flow from specific rules of law and not from subjective evaluation. As set forth in the 9REN award 1:

"There is no doubt that an enforceable legitimate expectation' requires a clear and specific commitment, but in the view of this Tribunal there is no reason in principle why such a commitment of the requisite clarity and specificity cannot be made in the regulation itself where (as here) such a commitment is made for the purpose of inducing investment, which succeeded in attracting the Claimant's investment and once made resulted in losses to the Claimant".

Thus, those questioning the relevance or effects of such expectations have the burden to prove the facts and legal grounds supporting the reasons to do so.

7. Against this backdrop, the Special Regime's salient legal traits shall be now considered.

8. The Special Regime had as its point of departure Law 54/1997 which provided for less than 50 MW wind facilities like the Claimants (such Claimants' facilities hereinafter the "Wind Farms") the right to opt for pool (market) price plus premium for the sale of their electricity.

Premium determination2 "... will take into account the voltage level of the delivery of energy to the network, the effective contribution to the improvement of the environment, the primary energy savings and energy efficiency, the production of economically justifiable useful heat and the investment costs incurred, in order to achieve reasonable profitability rates with reference to the cost of the money on capital markets" (the "Law 54 Standard").

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Footnotes omitted