International Arbitration Newsletter - November 2020 | Regional Overview: Europe

SPAIN

Renewable investors renounce claims against Spain

A Dutch subsidiary of Abu Dhabi’s sovereign wealth fund, Masdar Solar & Wind Cooperatief, has agreed to renounce a €80 million award against Spain to take advantage of the state’s new renewables incentives regime.

Last year, Spain approved a law offering investors several economic incentives that could only be accessed if they were to drop their cases against the state. Basically, the law set a rate of return of 7.398% for the period 2020 to 2031 for those who waived their right to compensation, whereas the rate of return for those who do not will amount to 7.05%.

The country gave investors until October 2020 to accept the offer, but has decided to extend it to December 2020 due to the COVID-19 pandemic.

This was the first time that an investor has given up their right to compensation in order to benefit from this law. However, in the last few weeks, other investors have decided to follow this path. A group of German solar investors, including Ferrostatal, RWE and Stadwerke München, have agreed to drop their annulment action against an award that favoured Spain in a €420 million ICSID claim.

In addition, Element Power Holdings BV, a claimant in the PV Investors Case, has agreed to waive its right to compensation from the €91 million award against Spain, while investors in Deutsche Bank affiliate RREEF have also agreed to renounce to part of the damages they won last year at the ICSID arbitration.

Spain faces ICSID claim from Japanese investor

Mitsui & Co (Mitsui), a Tokyo-listed Japanese conglomerate specialized in energy and infrastructure, have launched a new ICSID claim against Spain over its investment in a solar power project valued at €260 million, asserting that the new State Renewables Incentives Regime hereof constitutes a violation of the Energy Charter Treaty (ECT).

Guzman Energia, a joint venture formed by Mitsui and the Spanish construction company Fomento de Construcciones y Contratas (FCC) in 2010, was mainly engaged in the construction and operation of a 50-megawatt power plant in Cordoba. The electricity was to be sold to the grid by Guzman Energia, based on the Spanish feed-in-tariff scheme then in force. The construction of the power plant cost around €260 million and its commercial operation was planned for 2012 with a 35-year operating term.

However, following the investment of Mitsui, Spain has passed a series of measures reducing tariffs in solar photovoltaic sector, which has led to almost 50 investment treaty claims against the country, valued at US$ 7.3 billion. As a countermeasure, Spain passed a new law in 2019 allowing a rate of return of 7.39% for the investors with no pending case against Spain, while for those having pending cases, the rate of return shall be 7.09%. Mitsui now alleges that the newly enacted law has breached the ECT, which prevented the investors from bringing new claims or pressured them to withdraw pending cases.

GEORGIA

Telecoms investor files claim against Georgia

An investor from Azerbaijan named Nasib Hasanov has filed an ICSID investment treaty claim against Georgia over alleged state interference in a local internet provider, Caucasus Online, under the Georgia-Azerbaijan bilateral investment treaty.

The Azerbaijani investor is the ultimate owner of Neqsol Holding (Nesqol), a group of companies operating across the oil, gas, construction and telecom industries. The claim has been issued following the appointment by state authorities of a special manager to the board of Caucasus Online, in which Neqsol holds a 49% stake.

Neqsol claims that through that appointment, the Georgian government is allegedly trying to reverse the deal by which Neqsol acquired shares in Nelgado, the parent company of Caucasus Online, as the special manager has the power to dismiss directors, board members and suspend providers’ right to operate. Therefore, the claim is based on an alleged breach of Georgia’s obligation to treat Neqsol’s investment fairly and equitably.

UNITED KINGDOM

High Court prevents enforcement of guarantee against Scottish power generation company

The Commercial Court in London has granted Aggreko International Project (Aggreko) a Scottish power generation company operating in Yemen, an injunction preventing Yemeni Al Sadi Trading Group (Al Sadi) from enforcing a US$ 7.3 million guarantee until a DIFC-LCIA arbitration determines whether their contract with Aggreko was validly terminated.

Aggreko and Al Sadi entered in 2012 in a dry hire agreement, by which the latter rented from the former power generation equipment for use in Yemen. In September 2020, Aggreko terminated the agreement, arguing that Al Sadi owed US$ 30 million in outstanding fees, as well as mentioning the disturbance caused by Yemen’s ongoing war on its activity.

The Commercial Court held that until the dispute was resolved by the arbitral tribunal, the interim injunction restraining Al Sadi and the banks from facilitating payments under the guarantees should be maintained.