Nine investors in Europe’s largest solar power plant, including German energy giant RWE, have instructed Magic Circle firm Allen & Overy to sue Spain at the World Bank’s arbitration court following cuts to solar energy subsidies.
In what is the first to be made at the International Centre for Settlement of Investment Disputes (ICSID) in 2015, eight German investors, including RWE, Ferrostaal and the city of Munich owned electricity supplier Stadtwerke München, together with a Spanish consortium owned by the triumvirate called Marquesado Solar, have filed an arbitration claim worth ‘hundreds of millions of pounds’.
The group are investors in Andasol power plant, a two square kilometre solar plant in Andalusia, southern Spain. They are entering arbitration under the Energy Charter Treaty, which 54 states including Spain have signed, giving investors of those countries the right to sue signatories if their investments are not protected or illegally damaged through state legislation. London-based arbitration partner Jeffrey Sullivan has been instructed to lead on the claim while Jose Luis Gomara Hernandez, head of investment arbitration at the Spanish Attorney General’s Office, is leading the country’s defence.
RWE’s renewable energy unit RWE Innogy reported in November that its operating profit fell from €111m for the first nine months of 2013 to €29m for period in 2014, in part due to ‘the reduction in subsidies for renewable energy plants by the Spanish government’.
The claim is the tenth pending against Spain at ICSID following the country’s decision to cut tariffs that had allowed investors to recover the cost of installing solar power infrastructure by charging above-market prices for electricity. Allen & Overy is handling six of the claims, including a multimillion pound claim from Paris-based private equity house Antin Infrastructure, with Sullivan combining with London-based partner Judith Gill QC and Madrid disputes head Antonio Vazquez-Guillen to bring billions of pounds worth of claims against the state, most of which are still being quantified by the accountants.
Allen & Overy’s arbitration team has experienced a bumper 2014 after being selected by Nokia to represent the Finnish phone maker in two claims worth a combined $775m against India in a tax dispute that has seen the company’s assets frozen. It is also defending Pakistan against two claims at ICSID.
London-based arbitration partner Mark Levy told Legal Business: ‘The past two or three years have been incredibly busy for us in London and globally. The Spanish work has been fantastic and there are similar issues across Europe which look as if they’re going to give rise to similar claims.’