Quadrant’s Damages Experts Testify in Multi-Investor Spanish Solar Renewables Arbitration.

Quadrant’s experts, Dr. Daniel Flores and Mr. Jordan Heim, were retained by the Kingdom of Spain (“Respondent”) as quantum experts in a renewable energy arbitration claim initiated by  14 investor groups (“PV Investors” or “Claimants”) under the 1994 Energy Charter Treaty and the UNCITRAL rules (PCA Case No. 2012-14).  This dispute arose out of a series of energy reforms undertaken by the Spanish Government to address problems in its electricity sector.  Spain’s reforms included changes to the support schemes for investments in renewable energy, including fixed feed-in tariffs, which provide renewable energy producers payments for electricity production that are above market rates.

Claimants alleged that certain regulatory changes enacted by Spain had a negative economic impact on their interest in 68 photovoltaic plants (about 240 megawatts).  Claimants submitted two different claims in this arbitration.  Under the Primary Claim, damages were based on the assumption that Claimants’ photovoltaic facilities were entitled to a specific feed-in tariff scheme in perpetuity (the “Primary Claim”).  Under the Alternative Claim, damages were based on the assumption that Claimants’ photovoltaic facilities are entitled to a specific reasonable rate of return (the “Alternative Claim”).

The Tribunal (President: Prof. Gabrielle Kaufmann-Kohler, Co-arbitrators: The Hon. Charles N. Brower and Judge Bernardo Sepúlveda-Amor) found breaches to the Energy Charter Treaty.  By majority, the Tribunal dismissed Claimants’ Primary Claim and adopted Claimants’ Alternative Claim.

Dr. Daniel Flores and Mr. Jordan Heim were tasked by the Tribunal, along with Claimants’ experts, to calculate the internal rate of return of Claimants’ plants and the potential losses stemming from the regulatory changes under the Alternative Claim in an Expert Joint Model.  This model contained a series of assumptions for the Tribunal to choose from, including: what taxes to include, as well as regulatory aspects in relation to Claimants’ photovoltaic facilities.  Claimants sought €1.2 billion, under the Alternative Claim.  The Tribunal issued an award for € 91 million.  

Spain was represented by the Abogacía General del Estado, Ministry of Justice of the Government of Spain and Herbert Smith Freehills LLP.  Dr. Flores and Mr. Heim were supported by a Quadrant team that included José Díaz Barriga.

Sources: UNCTAD; Italaw; Award