CHARANNE B.V. AND CONSTRUCTION INVESTMENTS S.A.R.L. V. SPAIN, SCC CASE NO.

062/2012, FINAL AWARD, 21 JANUARY 2016

INVESTMENT: The present dispute concerns the regulatory framework of the Kingdom
of Spain regarding generation systems based on photovoltaic solar electricity. Spain, has
established, among other things, a system of premiums and regulated tariffs to remunerate
electricity production originating from photovoltaics. In summary, the Claimants claim
that after attracting their investments in the photovoltaic generation sector, the
Respondent has unlawfully amended the special regime regulating the industry, causing
various losses.
FET Clause: Article 10(1) ECT provides that “each Contracting Party shall, in accordance
with the provisions of this Treaty, encourage and create stable, equitable, favourable and
transparent conditions for Investors of other Contracting Parties to make Investments in
its Area.” Article 10(1) also provides, among those conditions, the commitment to grant
those investments fair and equitable treatment.

Alleged Violation of FET: the Claimants submit in their Memorial that Spain violated
Article 10(1) ECT “by unexpectedly modifying the regulatory and economic regime
applicable to them, whilst frustrating the Claimants’ legitimate expectations.” “a glance at
the current legal framework (RDL 9/2013 and Act 24/2013) is enough to verify that […] to
date, the remuneration scheme for photovoltaic facilities, the main corporate purpose of
Charanne and Construction, remains unknown.” (tl;dr version: they were
subsidizing/incentivizing renewable energy players; the renewable energy people wanna
know how much they’re gonna save/make)

490. In the present case, there are no specific commitments entered into by Spain towards the
Claimants. This kind of commitment could have been entered into on the basis of a stabilization
clause, or through any kind of declaration made by the State to the investors, stating that the
existing regulatory framework would not change. The Claimants were not the addressees of any
such declaration.
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494. Based on the foregoing, the Tribunal concludes that there was no specific commitment
entered into by Spain towards the Claimants. Thus, the matter lies in analysing whether the legal
order in force at the time of the investment could by itself give rise to legitimate expectations
and, if appropriate, to what expectations.
495. The determination of whether the investor’s legitimate expectations have been defeated
must be based on an objective standard or analysis. The mere subjective belief that the
investor could have had at the time of making the investment does not suffice. Similarly, the
application of this principle depends on whether the expectation has been reasonable or not in the
specific case. In this regard, the representations that may have been presented by the host State to
encourage the investment are relevant.
496. In the first place, the arguments submitted by the Claimants must be examined in order to
contend that Spain launched a “campaign to attract investments.” According to the Claimants,
this campaign was carried out through the dissemination of documents such as the brochure El
sol puede ser suyo, in which very high returns on investment were advertised. The Tribunal does
not believe that, by themselves, such documents could have given rise to the legitimate
expectations that the tariff provided at the time of the investment was not going to be modified.
497. It is true that these documents and the presentation thereof carried out in Spain, show the
Respondent’s intention to encourage and attract investments in the renewable energy sector.
However, these documents are not sufficiently specific to give rise to any expectations
regarding the fact that RD 661/2007 and RD 1578/2008 were not going to be modified.
Although the 2007 presentation does indeed contain a reference to RD 661/2007, none of its
wording could lead anyone to reasonably infer that the regulated tariff would remain
unmodified during the entire lifespan of the plants.
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500. In this regard, the Tribunal shares the stance of the tribunal of the case Electrabel v.
Hungary under the ECT, according to which “While the investor is promised protection against
unfair changes, it is well established that the host State is entitled to maintain a reasonable degree
of regulatory flexibility to respond to changing circumstances in the public interest.
Consequently, the requirement of fairness must not be understood as the immutability of the
legal framework, but as implying that subsequent changes should be made fairly, consistently
and predictably, taking into account the circumstances of the investment.”
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502. Similarly, the tribunal of the case El Paso v. Argentina considered that “if the often repeated
formula to the effect that ‘the stability of the legal and business framework is an essential
element of fair and equitable treatment’ were to be admitted, legislation could never be changed:
the mere enunciation of that proposition shows its irrelevance. This standard of behaviour, if
strictly applied, is not realistic, nor is it the BITs’ purpose for States to guarantee that the
economic and legal conditions in which investments take place will remain unaltered ad
infinitum.” […] “In other words, the Tribunal cannot follow the line of case law which
determined that fair and equitable treatment was viewed as implying the stability of the legal and
business framework. Economic and legal life is by nature evolutionary.”
503. In this case, the Claimants could not have the legitimate expectation that the regulatory
framework laid down by RD 661/2007 and RD 1578/2008 would remain unchanged during the
entire lifespan of their plants. Accepting such an expectation would, in fact, amount to freezing
the regulatory framework applicable to eligible plants, even though the circumstances may
change. Any modification to the tariff amount or any limitation in the number of eligible hours
would thus constitute a violation of international law. In practice, the situation would be
equivalent to that resulting from the signing by a State of a stabilization agreement, or of a
commitment to never modify the regulatory framework. The Arbitration Tribunal cannot
accept such a conclusion. In fact, the Claimants themselves have clearly stated that they
could not reasonably expect that the regulatory framework would remain unchanged.