Creeping expropiation in Spain

The other day I read an interesting article on creeping expropriation in El Confidencial; investment funds are opening arbitration cases against Spain. Spain is already facing several claims of large international funds for earlier retroactive measures (floor and cap of RDL14/2010 and 25 years’ limit of RD1565/2010), and this new claim is to be added hereto. The reason  these funds chose the Energy Charter Treaty´s international arbitration procedure is that they hold little trust in the Spanish legal system. I have to painfully admit that I do understand their concerns, very well actually. 

The article also mentions that there’s very little litigation going on at national level, an affirmation with which I disagree. Our firm alone is already representing a group of 1000+renewable energy producers, a group that is increasing rapidly by the day, and of which a very large majority has decided to seek legal remedies against this creeping expropriation on a national level. 

How do I explain that I represent this group, after just having painfully admitted my distrust in the Spanish legal system?

To explain this, we have to examine the reasons for the Spanish legal system to inspire lack of confidence. One of the reasons is the difficult access to E.U. law in the Spanish system, Spanish governments and also its Supreme- and Constitutional Court -do what’s in their power to block that access. Why? Because the Spanish legal doctrine of “rentabilidad razonable” – reasonable return on investment – over the last decade or so has become very distantiated from the European Court of Justice’s jurisprudence. This situation is a time bomb, however. Sooner or later a prejudicial ruling by the European Court of Justice on this house of cards is inevitable. The application of this doctrine - we already dubbed this "la infinita elasticidad de la rentabilidad razonable" - de facto is nothing else than creeping expropiation. The government is now actually thinking of passing the assets, which it has previously spoiled  by applying this toxic recipe, to the SAREB; Spains bad bank.

The odds are not very favorable for Spain, and this is a classic example of culpa in causa: It is the indecisiveness and step by step approach of Spain, alongside with poor legislative quality that has produced structural errors which eventually will result in dodgy E.U.judicial obstacles. Meanwhile the problem is for the participants in the electricity system affected by this. It seems that the strategy of the Spanish government is to gain a tour the force, and that the market participants will lack the financial backbone to sit through the legal battle.

It is for that reason that we have opened another battlefield, directly at the heart of the E.U. institutions in Brussels, with the European Commission last December 4th. We are prompting the E.C. to start an infringement procedure against Spain, amongst other issues because of direct treaty incompliance, structurally evading its article 267TFUE obligations in the electricity sector. In terms of E.U. law compliance, Spain is not different from any other E.U. member state, and it is time that this is made clear to Spain. The slogan “Spain is different” is nice for tourism, but has no validity in E.U. law. We did this with the Platform for a new energy model in Spain, "Plataforma por un nuevo modelo energético" and APPA, the spanish renewable asociation (APPA is the only association that encompasses all renewable technologies in Spain). 

Miguel Angel Martinez-Roca, president of ANPIER, an important asociation of spanish photovoltaic energy producers also frequently visitis Brussels: he spoke to eurocommissioner Günther Oettinger this week about the creeping expropiation going on in Spain; Mr. Oettinger apparently was not amused, to say the least. 

Our approach is strongly based in E.U. law and we think that all efforts in the legal battle on a national level should focus on this aspect, in order to achieve knocking down the fragile “rentabilidad razonable” house of cards constructed by the Spanish Supreme Court. The second week of April we will be in Brussels again with Platform for a new energy model in Spain and APPA, a lot of meetings have been scheduled already, we will let you know more about that soon.    

We will publish a series of posts deepening the different aspects of this article during the coming weeks. My colleague Francesco Cortesi, who wrote his legal thesis in Italy on this subject will be dealing with the Energy Charter Treaty´s international arbitration procedure. Another colleague, Daniel Perez, who recently finished his LL.M at the College of Europe in Bruges will give us some more input from an EU law perspective, and I will write an indepht article on the equivalent of creeping expropiation in Spain.