Arbitration Award Potentially in Breach of EU State Aid Rules

Could an arbitration award be found in violation of the EU State aid rules? Apparently, it could.

Let’s take a look at the Antin v. Spain arbitration case and award. In 2007 Spain established a scheme of support for the production of electricity from renewable sources, which was not notified for approval by the EU Commission under the State aid rules. It then modified these rules in 2013, notified the modified rules to the Commission, which approved them as compliant in November 2017. These new rules offered lesser and/or different support than the 2007 rules.

Two companies of the Antin group (Antin Infrastructure Services Luxemburg S.a.r.l. of Luxemburg and Antin Energia Termosolar B.V. of the Netherlands), investors in renewables installations in Spain under the 2007 scheme, considered that they were owed compensation by Spain for loss of the support due to them under the 2007 rules, which was no longer available under the 2013 rules. They then commenced an arbitration procedure against Spain (Case No. ARB/13/31, ICSID – Washington, DC), claiming that Spain had infringed the Energy Charter Treaty (of 17 December 1991; the ECT) when it changed the support scheme of 2007. And they won. The arbitration court found for the Antin companies and obligated Spain to pay EUR 101 million in compensatory damages (plus interest and some arbitration costs).

The Commission now considers that the arbitration award may give raise to illegal State aid since its recipients may receive an advantage equivalent to those provided under the former (not notified) scheme of 2007. The Commission is particularly concerned that the award contradicts the “mutual trust and autonomy” of the EU Law (a concept well articulated in the CJEU Achmea case (C-284/16), which made the ECT investor-State arbitration provisions in regard of intra-EU disputes virtually inapplicable), that it could be discriminatory (since Spanish investors could not use the same manner of redress), and that it could confer to recipients an excessive advantage (since they were already benefiting under the 2013 incentive rules).

In fact, the Commission has already stated back in July 2018 (via the Communication on the protection of investments, which reflected the principles of the Achmea decision) that the investor-State arbitration clause in the ECT does not apply intra-EU, i.e. between investors from a Member State and another Member State, it being meant to create rights and obligations only between EU and non-EU countries.

The Commission is now commencing an in-depth investigation to determine whether its concerns are justified. It remains to be seen what will happen if the Commission in fact finds that the arbitration award is in fact incompatible with the EU State aid rules. What will happen to the award itself? Will Spain be requested to seek judicial annulment of the award, or perhaps design some other way of reducing its effects to a level of compatibility?