STATE AID — SPAIN

State aid SA.54155 (2021/NN) — Arbitration award to Antin — Spain

Invitation to submit comments pursuant to Article 108(2) of the Treaty on the Functioning of the European Union

(Text with EEA relevance)

(2021/C 450/02)

By means of the letter dated 19 July 2021 reproduced in the authentic language on the pages following this summary, the Commission notified Spain of its decision to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union concerning the abovementioned measure.

Interested parties may submit their comments on the measure in respect of which the Commission is initiating the procedure within one month of the date of publication of this summary and the following letter, to:

European Commission, Directorate-General for Competition State Aid Greffe 1049 Brussels BELGIUM Fax: + 32 2 296 12 42 Stateaidgreffe@ec.europa.eu

These comments will be communicated to Spain. Confidential treatment of the identity of the interested party submitting the comments and/or of parts of the comments submitted may be requested in writing, stating the reasons for the request.

Spain notified on 17 April 2019 the arbitration award issued on 15 June 2018 by the Arbitration Tribunal (‘the tribunal’) established under the auspices of the International Center for Settlement of Investment Disputes (‘ICSID’), in the context of the arbitration proceedings ICSID Case No ARB/13/31 Antin Infrastructure Services Luxembourg S.à.r.l. and Antin Energia Termosolar B.V. (together ‘Antin’) vs Spain. The award, as amended on 29 January 2019, grants to Antin a compensation of EUR 101 million, together with interest on this sum and contribution to the costs of the arbitration proceedings, to be paid by Spain due to Spain’s breach of the Energy Charter Treaty (the ‘award’ or ‘the measure’).

In 2011, Antin invested in the acquisition of a 45 % shareholding in the ‘Andasol companies’, i.e. in Andasol-1 Central Termosolar UNO S.A. and Andasol-2 Central Termosolar DOS. The Andasol companies own and operate the Andasol-1 plant and Andasol-2 plant, two concentrated solar power (‘CSP’) installations of capacity 49,9 MW each, located in Granada, Spain (together, ‘Andasol plants’). The construction of the Andasol plants was completed in 2008 and 2009 and they were registered in the relevant administrative register of electricity production facilities in 2009.

At the time of Antin’s investment, the Andasol plants were benefitting from the premium economic scheme that was in place (the ‘2007 scheme’). This scheme aimed at fostering electricity production from renewable energy sources (‘RES’) and was governed by Royal Decrees 661/2007, 1578/2008 and 6/2009. Under the 2007 scheme, the Andasol plants benefitted also from the support for electricity produced with natural gas from 2009 to 2012.

Spain amended the 2007 scheme through a series of legal acts, i.e. Royal Decree-Law 9/2013, Law 24/2013, Royal Decree 413/2014 and Orders IET/1045/2014 and IET/1459/2014 (the ‘2013 scheme’). The 2013 scheme applies a different methodology for the calculation of the remuneration to renewables installations compared to the 2007 scheme. The 2013 scheme received State aid clearance in 2017 (see SA.40348 — the ‘2017 Commission Decision’) under the guidelines on State aid for environmental protection and energy 2014-2020 (‘EEAG’) (1). Spain submitted that the Andasol plants continue to receive support under the 2013 scheme up to date.

In August 2017, Antin sold its investment in the Andasol plants to Cubico Sustainable Investments Limited at a price of EUR 75,2 million.

According to Antin, the changes in the Spanish legal framework applicable to CSP plants, in which Antin had invested, caused serious and substantial damages to its investments and were contrary to Spain’s obligations under the Energy Charter Treaty (‘ECT’), in particular the principle of fair and equitable treatment under Article 10(1). Hence, in November 2013, Antin brought an action against Spain before the tribunal.

The tribunal concluded that Spain breached Article 10(1) of the ECT by failing to accord fair and equitable treatment to Antin’s investments and granted a compensation. This is due to the regulatory changes to the remuneration scheme for renewable installations that were brought about by legal acts that Spain adopted since July 2013 compared to the remuneration scheme that was in force at the time of Antin’s investment.

The beneficiary of the measure is the recipient of the award compensation, i.e. Antin. The form of support will consist in a one-off payment of the total amount calculated as the arbitration award, the pre-award interests, as well as the post-award interests, which will have to be recalculated on the basis of the date of actual payment. At the time of notification, Spain estimated the total amount at EUR 114 900 983. The payment of the compensation will be financed by the general budget of the Spanish State.

Spain submitted that the award is incompatible State aid. That the sole objective of the measure is to comply with an enforceable and binding arbitration award. Further, Spain submitted that the measure has no incentive effect and that the State intervention is mandatory in so far as compliance with the award is binding on Spain and the award upholds the form of order sought by Antin by granting it compensation to be paid by Spain.

On 25 June 2021, the Full Federal court in Australia recognised the award as binding on Spain.

The Commission considers, at this stage, that the cumulative criteria for the existence of State aid are met and that the measure constitutes State aid. In this regard, the Commission also refers to the assessment made in section 3.5.3 in the 2017 Commission Decision, where it is noted that any compensation, which an arbitration tribunal grants to an investor on the basis that Spain has modified the 2007 scheme by the 2013 scheme constitutes in and of itself State aid. However, the arbitration tribunals are not competent to authorise the granting of State aid. That is an exclusive competence of the Commission. Therefore, this compensation is notifiable State aid pursuant to Article 108(3) TFEU and subject to the standstill obligation.

Spain has not presented arguments that could justify the measure under Articles 107(2) and/or 107(3) of the TFEU. At this stage of the procedure, the Commission expresses its preliminary doubts about the compatibility of the measure with the internal market, and in particular about (i) a possible breach of EU Treaties by the aid measure, and (ii) the non-compliance of the aid measure with the compatibility criteria under the relevant State aid guidelines.

As regards (i), given that the award was adopted based on the investor-State arbitration mechanism laid down in Article 26 of the ECT, the Commission, at this stage, takes the view that the award could contravene Article 19(1) TEU, Articles 267 and 344 TFEU, and the general principles of EU law of mutual trust and autonomy. In addition, the Commission has doubts as the award could create a discrimination among the 2007 scheme investors based on their nationality and the ability to access international arbitration.

As regards (ii), the Commission notes that the granting moment of the aid is relevant in order to establish under which State aid guidelines the aid has to be assessed. The Commission assesses the compatibility of the measure under the 2008 State aid guidelines for environmental protection (the ‘EAG’) (2), which apply if the granting moment is when the 2007 scheme was modified by the 2013 scheme, as well as under the EEAG, which apply if the granting moment is the adoption or execution of the award.

The Commission assesses under the compatibility criteria in the EAG and EEAG applicable to aid to energy from renewable sources apply, as this is the activity that gave rise to the arbitration proceedings leading to the award.

Based on the information available, the Commission has doubts that the measure has an incentive effect and is necessary in order to develop the economic activity of producing electricity from renewable sources or of another activity. In addition, as the Andasol plants receive support under the 2013 scheme, the compensation granted by the award would increase the rate of return above the levels that the Commission found proportionate for the existing plants, such as the Andasol plants, in its 2017 Commission Decision. Furthermore, as the compensation under the award is granted to only one of the beneficiaries of that scheme, it could unduly distort competition.

In accordance with Article 16 of Council Regulation (EU) 2015/1589 (3), all unlawful aid can be subject to recovery from the recipient.

TEXT OF LETTER

(1) Communication from the Commission — Guidelines on State aid for environmental protection and energy 2014-2020 (OJ C 200, 28.6.2014, p. 1).

(2) Community guidelines on State aid for environmental protection (OJ C 82, 1.4.2008, p. 1).

(3) Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (OJ L 248, 24.9.2015, p. 9).

(4) ICSID Case No ARB/13/31. Details available here: https://icsid.worldbank.org/cases/case-database/case-detail?CaseNo=ARB/13/31.

(5) The Energy Charter Treaty is a multilateral agreement applicable to the energy sector. It was signed by the EU in December 1994 and entered into force for the EU in April 1998. Its key provisions concern the protection of investment, trade in energy materials and products, transit and dispute settlement. The ECT is currently under modernisation process.

(6) Commission Decision of 10 November 2017 in State aid SA.40348 (2015/NN) — Spain — Support for electricity generation from renewable energy sources, cogeneration and waste (JOCE C/442/2017).

(7) Regulation No 1 determining the languages to be used by the European Economic Community (OJ 17, 6.10.1958, p. 385).

(8) See also 2017 Commission Decision, section 3.5.3.

(9) Amicus curiae briefs submitted by the European Union in several proceedings before the U.S. Courts, including in Civil Action No. 18-1753 Antin v Spain; the text of those amicus curiae briefs is available at https://ec.europa.eu/competition-policy/state-aid/national-courts/observations-other-courts_en; see also the relevant Council document ST 6146 2019, endorsing the filing of this amicus curiae brief, available at https://data.consilium.europa.eu/doc/document/ST-6146-2019-INIT/fr/pdf. See also Communication from the Commission to the European Parliament and the Council on ‘Protection of intra-EU investment’ of 19 July 2018 (COM (2018) 547 final), page 3-4.

(10) Case A 1/20, Request for an opinion by Belgium, and Case C-155/21, Athena Investment v Spain.

(11) http://europa.eu/rapid/press-release_IP-15-5198_en.htm. The Commission notes that on 5 May 2020, 23 Member States signed an agreement for the termination of intra-EU BITs. That agreement implements the Achmea judgment and entered into force on 29 August 2020.

(12) Judgment of the Court of Justice of 6 March 2018, Case C-284/16, Slowakische Republik v Achmea BV, ECLI:EU:C:2018:158.

(13) This interpretation was confirmed by the Advocate General Szpunar Opinion of 3 March 2021 in Case C- 741/19, République de Moldavie, ECLI:EU:C:2021:164, see in particular paragraphs 70-80 and 89-90; see also the Advocate General Saugmandsgaard Øe Opinion of 29 October 2020 in Joined Cases C-798/18 and C-799/18, Federazione nazionale delle imprese elettrotecniche ed elettroniche (Anie) and Others, ECLI:EU:C:2020:876, paragraph 92 and footnote 55.

(14) Judgment in Commission v Italy, 10/61, EU:C:1962:2, page 10: ‘In matters governed by the EEC treaty, that treaty takes precedence over agreements concluded between the Member States before its entry into force.’ This principle has been confirmed many times thereafter both for multilateral agreements and bilateral agreements, see for example judgments in Conegate, 121/85, EU:C:1986:114, paragraph 25; in Matteucci v Communauté française de Belgique, C-235/87, EU:C:1988:460, paragraph 22; in Exportur, C-3/91, EU:C:1992:420, paragraph 8, in Commission v Luxembourg, C-473/93, EU:C:1996:263, paragraph 40; in Commission v Austria, C-147/03, EU:C:2005:427, paragraph 58; in Budějovický Budvar, C-478/07, EU:C:2009:521, paragraphs 97 to 99; and in Commission v Slovakia, C-264/09, EU:C:2011:580, paragraph 41.

(15) See, for instance, Judgment of the Court of Justice of 30 May 2006, Case C-459/03, Commission v Ireland, ECLI:EU:C:2006:345; Opinion 2/13 paragraph 180.

(16) See in this regard i) Communication from the Commission to the European Parliament and the Council on ‘Protection of intra-EU investment’ of 19 July 2018 (COM (2018) 547 final), page 3-4; and ii) Declaration of the Representations of the Governments of the Member States of 15 January 2019 on the legal consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union, page 2. Judgment of the Court of Justice of 6 March 2018, Case C-284/16, Slowakische Republik v Achmea BV, ECLI:EU:C:2018:158.

(17) Directive 2001/77/EC of the European Parliament and of the Council of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market (OJ L 283, 27.10.2001, p. 33).

(18) Judgment of the Court of 13 March 2001 in C-379/98, PreussenElektra, ECLI:EU:C:2001:160.

(19) Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC (OJ L 140, 5.6.2009, p. 16).

(20) Communication from the Commission — Guidelines on State aid for environmental protection and energy 2014-2020 (OJ C 200, 28.6.2014, p. 1).

(21) Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity (OJ L 27, 30.1.1997, p. 20).

(22) Antin award, paragraph 91.

(23) See Article 2 (1) of Royal Decree 661/2007.

(24) Order of the Court of 22 October 2014 in Case C-275/13 Elcogas. The Court found that the compensation mechanism was imputable to the State, since it was established and regulated by Law 54/1997 and Royal Decree 2017/1997. Relying on those provisions, the Court also concluded that the compensation mechanism for extra costs was financed through State resources. In particular, the Court observed that a Ministerial Decree fixed annually the amount of the network access charges, that the latter were imposed on all domestic final consumers and network users. Moreover, the National Energy Commission, a State body, administered the funds thus collected and did not enjoy any discretion in that regard.

(25) For an exhaustive list of the scheme’s legal basis, see Section 2.1 of the 2017 Commission Decision.

(26) For details on the eligible technologies, see recital 14 of the 2017 Commission Decision.

(27) This rate was applicable to the first regulatory period (2014-2019). From the second regulatory period onwards, the rate is 7,09 %, if no use is made of the second additional provision of Royal Decree-Law 17/2019, to maintain the profitability of the previous period.

(28) Antin award, paragraph 139-140.

(29) See 2017 Commission Decision, recital 120.

(30) Antin award, paragraph 110.

(31) Antin award, paragraphs 70, 72.

(*1) Data are only available for November and December 2009, and the reported energy input corresponds only to this period.

(*2) Spain explained that this reduction is due to a smaller generation in the period March-June 2020, which corresponds to the lockdown due to COVID-19 crisis and that in the third and fourth quarters of 2020 production recovered to normal levels, even exceeding those of the previous year.

(32) Antin award, paragraph 261.

(33) Antin award, paragraph 359.

(34) Antin award, paragraph 46.

(35) Antin award, paragraph 236.

(36) Antin award, paragraphs 59-68.

(37) Antin award, paragraphs 51-53, 56-58.

(38) Antin award, paragraphs 572-573.

(39) Antin award, paragraph 748.

(40) Antin award, paragraph 640.

(41) Antin award, paragraph 587.

(42) Antin award, paragraph 667.

(43) Antin award, paragraph 673.

(44) Antin award, paragraph 691, 714, 725 (as amended by the tribunal’s rectification decision of 29 January 2019).

(*3) Actual data based on CNMC information

(45) See 2017 Commission Decision, recital 165. This view has been confirmed in the Opinion of Advocate General Szpunar of 1 July 2021 in Case C-638/19 P, Commission v European Food and Others.

(46) Judgment of the Court of 11 July 1996, Case C-39/94, SFEI and Others, ECLI:EU:C:1996:285, paragraph 60; Judgment of the Court of Justice of 29 April 1999, Case C-342/96, Spain v Commission, ECLI:EU:C:1999:210, paragraph 41.

(47) Judgment of the Court of Justice of 27 September 1988, Joined Cases 106/87 to 120/87, Asteris and Others v Greece and EEC, ECLI:EU:C:1988:457, paragraph 23.

(48) Judgment of the General Court of 18 June 2019, Case T-624/15, European Food and Others v Commission, ECLI:EU:T:2019:423, paragraph 103.

(49) See recitals 101 and 102 of Commission Decision (EU) 2015/1470 of 30 March 2015 on State aid SA.38517 (2014/C) (ex 2014/NN) implemented by Romania — Arbitral award Micula v Romania of 11 December 2013 (OJ L 232, 4.9.2015, p. 43).

(50) Advocate General Ruiz-Jarabo Colomer has explained that the award of damages equal to the sum of the amounts of aid that were envisaged to be granted would constitute an indirect grant of the aid found to be illegal and incompatible with the common market (Opinion of 28 April 2005, Joined Cases C-346/03 and C-529/03, Atzeni and Others, ECLI:EU:C:2005:256, paragraph 198).

(51) Judgment of the General Court of 18 June 2019, Case T-624/15, European Food and Others v Commission, ECLI:EU:T:2019:423, paragraph 78. The appeal proceedings before the Court of Justice are ongoing: C-638/19 P, Commission v European Food and Others. The Advocate General Szpunar considered in his Opinion, delivered on 1 July 2021, that the General Court erred in law as regards the moment at which the aid was granted (ECLI:EU:C:2021:529, paragraphs 125, 128-129, 133-135).

(52) See footnote 52 above.

(53) Judgment of the Court of First Instance of 12 September 2007, Case T-68/03, Olympiaki Aeroporia Ypiresies v Commission, ECLI:EU:T:2007:253, paragraph 34.

(54) Judgment of the Court of Justice of 22 September 2020, Case C-594/18 P, Austria v Commission (Hinkley Point C), ECLI:EU:C:2020:742, paragraph 44.

(55) See 2017 Commission Decision, recitals 159-166.

(56) Either on 2 September 2021 in case C-741/19 Republic of Moldova, or in opinion 1/20 or in case C-155/21, which should be decided within the next 18 months.

(57) Judgment of the Court of Justice of 6 March 2018, Case C-284/16, Slowakische Republik v Achmea BV, ECLI:EU:C:2018:158.

(58) See in this regard i) Communication from the Commission to the European Parliament and the Council on ‘Protection of intra-EU investment’ of 19.7.2018 (COM (2018) 547 final), page 3-4; and ii) Declaration of the Representations of the Governments of the Member States of 15 January 2019 on the legal consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union, page 2.

(59) The Commission shall assess the compatibility of unlawful State aid with the internal market in accordance with the substantive criteria set out in any instrument in force at the time when the aid was granted. See Commission notice on the determination of the applicable rules for the assessment of unlawful State aid (notified under document number C(2002) 458) (OJ C 119, 22.5.2002, p. 22).

(60) Judgment of the Court of 19 December 2019, Case C-385/18, Arriva Italia and Others, ECLI:EU:C:2019:1121, paragraph 36.

(61) Commission decision of 30 March 2015 in State aid SA.38517 Micula v Romania (ICSID arbitration award). The Commission decision was annulled by the Judgment of the General Court of 18 June 2019, Case T-624/15, European Food and Others v Commission, ECLI:EU:T:2019:423. The appeal proceedings before the Court of Justice are ongoing (C-638/19 P, Commission v European Food and Others).

(62) Community guidelines on State aid for environmental protection (OJ C 82, 1.4.2008, p. 1).

(63) See footnote 52 above.

(64) As confirmed by the Judgment of the Court of Justice of 22 September 2020, Case C-594/18 P, Austria v Commission (Hinkley Point C), ECLI:EU:C:2020:742.

(65) The Court of Justice has established the criteria to define an economic unit in its Judgment of 10 January 2006, C-222/04, Cassa di Risparmio di Firenze and Others, ECLI:EU:C:2006:8, paragraph 109-125.

(66) See 2017 Commission Decision, recital 120.

(67) As confirmed by the recent Judgment of the Court of Justice of 22 September 2020, Case C-594/18 P, Austria v Commission (Hinkley Point C), ECLI:EU:C:2020:742.

(68) See 2017 Commission Decision, recitals 119-124.

(69) See 2017 Commission Decision, recital 120.