European Court of Justice on legal certainty
In our article "A turn in Spanish Jurisprudence on retroactivity" we advocated a U-turn in Spanish jurisprudence on retroactivity, alleging incompatibility of such retroactivity with EU Law. We based our general opinion on a straight forward analysis of Spanish Jurisprudence, and on the COM documents which were part of the legislative process of Directive 28/2009/EC. We spoke with the European Commission about our findings, and were recommended to study the Plantanol case. Which of course we did.
To grasp a better understanding of the structure of the Plantanol Case we made an infographic for you. We grouped the arguments of the Court of Justice of the European Union (CJEU) in group A, B, C, D and E. We numbered the individual elements of the argumentation 1 to 14. The CJEU arguments
are marked with a European Union flag and the arguments embraced by the Spanish Supreme Court (SSC) are marked with a Spanish Flag. A Spanish Flag combined with a no entry sign means that the Spanish Jurisprudence discussed in our aforementioned post has not mentioned such argument. The arguments of groups A and C stem from earlier jurisprudence of the CJEU, but the SSC may not have found it necessary to quote those, in the case of group D it is because these are introduced after the date of the SSC ruling. The CSS only quotes from group B and D, in what seems a cherry picking exercise to me. With its cherry picking the SSC gives an entire new dimension to the legal certainty doctrine of the CJEU.
If you click on the image a larger version will open in a new window.
Infographic Plantanol Case is licensed under a Creative Commons Reconocimiento-CompartirIgual 3.0 Unported License.
Unchanged Community framework
Argument number 9 and number 14 are particularly interesting: The Community rules have not been materially changed, the policy goal are still upright, and have even been increased. The Spanish national discretionary power has been exercised not to choose a different measure as allowed under the Directive, but merely to modify the economical conditions of the measure, especially protected in number 2 and 3 of group A above. The Spanish modification tends to eliminate the key driver of the measure, without changing the measure. The conditio sine qua non of the measure is a fixed return for a fixed period.
Fixed return for a fixed period, conditio sine qua non
The particular situations of the owner of PV installations have not been taken into account by L14/2010, quite to the contrary. The particular situation here is Project Finance. No Bank Due Diligence on PV projects in Spain has considered any regulatory risk for projects that complied with all legal requirements. RD661/2007 gave clear, precise and foreseeable rules with regard to the Feed in Tariff, in quantity and quality. In time and money. Nobody would have obtained Project Finance without such clear, precise and foreseeable rules with regard to this applicability of the Feed in Tariff. This applicability in qualitative and quantity terms a is not only an integral part of the functionality, but a condition sine qua non of its functionality, as said before. Without this guarantee a Feed in Tariff does not work. It is hence impossible to make adaptations to the application of these new rules, as argument 6 herein before requires.
Argument 12 and 13 deal with the foreseeability of amendments. In the Plantanol Case a provision was made for intermediate adjustment of the measure, the aforementioned elements 12 and 13 discuss this. Such provision allowed for the economic operators to adjust, as discussed in group C, number 8. In Plantanol the adjustment was announced and therefore foreseeable to a certain extent. However, RD661/2007 did and does not envisage intermediate adjustments in its applicability. It expressly envisages only adjustment for future projects. The adjustments of L14/2010 have been unforeseen in the sense that neither they were envisaged in RD661/2007, nor could they reasonably be expected by anybody in the marketplace. L14/2010 came out of the blue, making use of a legislative emergency instrument, which in this particular subject matter was arbitrary and unjustified. Nobody foresaw the discretionary power of the Kingdom of Spain to encompass the elimination of the very "raison de être" of the Feed in Tariff. If the Spanish Government felt that it had this discretionary power, why didn't it cut the Feed in Tariff before the majority of the PV Installation were built? For the government it was perfectly foreseeable what the Feed in Tariff would cost (Installed Capacity x Time x Tariff).
The SSC argues that the Electricity Sector Law is the basis for the legal certainty in Spain, reasoning that the formula "reasonable return on investment, with reference to the price of money in the capital markets" is the only legal certainty for the economic operator. The following lack of clear, precise and foreseeable rules of such Law according to the SSC is a regulatory risk which is to be borne by the economic operators.
The Spanish legislative technique of implementing European Directives on two different national levels, between which the SSC subsequently creates a vacuum, in practice does not allow for clear, precise and foreseeable rules with regard to the Feed in Tariff for PV. In my understanding this implementation of EU Law does not comply with the very outset of the Plantanol Case, in group A herein above. The SSC should apply the doctrine of the CJEU entirely, and not only the elements of group B and D. If only the latter were to be applied by the cherry picking SSC, the CJEU doctrine would remain nothing but empty rhetoric. The CJEU should assist the SSC in a balanced interpretation of its legal certainty doctrine, giving detailed guidelines and thus leave no doubt with regard to the integrity of the argumentation scheme. The SSC jurisprudence was founded on cases on premiums, which are measures of a different, more volatile nature than Feed in Tariffs. In the cases to come before the SSC about L14/2010 the court will have to take into account the specific situation of the PV Feed in Tariff.
Other legal battles against L14/2010
The legal certainty argument is the most difficult one in the battery of arguments against L14/2010 as discussed on this blog. We discussed the most difficult one first. The non-discrimination issues raised by L14/2010, as discussed in various earlier posts on our blog, are more promising.
We will try to find some time to discuss the European Case Law on non-discrimination issues in one of our next posts.
In meantime we are still preparing litigation against L14/2010. If you own PV installations in Spain which may be affected by this legislation, please do not hesitate to contact us: recursoRDL@holtropslp.com