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Jones Day Publications

International Remedies for Foreign Investors in Europe's Renewable Energy Sector

February 2015

International investors who have suffered losses in the renewable energy sectors in Spain, the Czech Republic, Italy, Greece, Romania and Bulgaria, among others, may be entitled to compensation for their losses under the Energy Charter Treaty ("ECT") and/or relevant bilateral investment treaties ("BITs"). The solar, hydro and wind sector exploded following the introduction by many European countries of favourable feed-in tariffs ("FiTs") that paid renewable-power generators above-market rates for their output and provided subsidies to consumers who installed renewable energy solutions in their homes. These incentives were offered in large part to help countries meet their EU targets on renewable energy. With generous and long-lasting FiTs promised by governments, investment poured in. However, demand was grossly underestimated, which led to a substantial increase in consumer energy prices as the FiT costs were passed on, and ever-increasing deficits in the energy budgets of many governments.

As governments rolled back FiTs and failed to honour other governmental guarantees, investors in the renewable sector have seen their investments decimated, or at least substantially reduced. Many have already turned to investor–state arbitration in an attempt to recoup their investments. Indeed, 23 percent of known investor–state arbitrations in 2013 arose as a result of measures regarding renewable energy adopted by Spain and the Czech Republic.[1] All claims are currently pending, and more claims are expected to follow.

This Commentary explains the measures that were taken against investors in the affected EU countries and describes the international remedies available to investors seeking to recoup their losses.


In Spain, it began in 2010. The government chipped away the incentives contained in earlier legislation through a series of measures, including: (i) limitation on eligible operating hours;[2] (ii) cancellation of the price premium guarantee after 30 years; (iii) revision of the inflation index;[3] (iv) total replacement of the FiTs with a "reasonable rate of return" and (v) imposition of a 7 percent tax on revenues.[4] With these measures, the government opened itself up to international claims from foreign investors, and it has since been inundated with a wave of investor–state arbitrations. Presently, there are at least 12 known cases pending against Spain, including one UNCITRAL claim for €600 million, brought by 88 investors in the photovoltaic sector.[5]

The Czech Republic

The Czech Republic experienced a similar boom in renewable energy after introducing generous FiT policies for solar energy that took the country's installed capacity above 1.9 gigawatts. Initially, the government guaranteed that the FiTs would not be lowered by more than 5 percent per year. However, this added pressure to electricity prices. In order to curb costs, the Czech legislature repealed that legislative guarantee and passed in 2010 a claw-back levy imposing a retrospective "solar tax" of 26 percent on the revenue of all solar energy producers.[6] It also repealed the tax breaks given to solar power plant operators and increased the fees in land use by 500 percent.[7] The Czech Republic is now facing at least seven investor–state claims brought by investors in the solar power sector.[8] Initially, six of the claims were brought as one consolidated claim by a group of 10 investors. However, the government objected, agreeing to consolidation only if the claimants were affiliates or if they had allegedly invested in the same operation.[9]


Similarly, the Italian government, since 2011, has implemented a number of measures that have affected the renewable energy sector, including reductions in FiTs and the end of incentives granted to photovoltaic plants located on agricultural land.[10] Italy is already facing its first ICSID claim brought in February 2014 by a solar power investor.[11] Italy also faces potential investment treaty claims from dozens of investors affected by Italy's approval of a decree in August 2014 that would make retroactive changes to FiTs from the beginning of 2015.[12] The changes will affect photovoltaic solar plants with a capacity of more than 200 kilowatts.[13]


Greece also rushed to support renewable growth through generous and ultimately unsustainable FiT programs, accumulating substantial deficits in the process. In 2013, a round of FiT cuts, which saw a 25–30 percent retrospective tax on solar revenues, resulted in an immediate reduction in photovoltaic installations across the country.[14]


The Romanian Renewable Energy Law, passed in 2008, contained a support scheme which provided renewable energy plants with green certificate subsidies and preferential buying terms. As was the case elsewhere, Romania's government later judged that this legislative framework was too generous and delivered the first statutory hit to renewables in April 2013. The government published a decree which halved the support awarded to existing hydro, wind and solar power generation under the country's green certificate scheme, and postponed until 2017–2018 some green certificates that were due to be allocated to producers.[15] It then cut the level of subsidies for all new projects coming online after 1 January 2014.[16] In September 2014, a group of Czech investors filed a notice of dispute against Romania under the ECT, concerning changes to the regulatory framework for "green certificates" in the solar photovoltaic sector.[17]


In Bulgaria, the incentives came in the form of exceedingly generous FiTs and long-term power purchase agreements—25 years for solar power and 12 years for wind and hydro power. Rapid growth in the sector put significant financial strain on the government, consumers and businesses. The cost of FiTs was passed on to electricity providers and grid operators, who were obliged to purchase power from the renewable plants at an inflated price. Further problems materialised as a result of the old and underdeveloped grid infrastructure, which became systemically overloaded. In response, the government enacted a plethora of legislation. In 2012, it reduced the FiTs by 50 percent for solar power producers and by 22 percent for wind power producers.[18] However, the government simultaneously increased energy prices for consumers by 13 percent.[19] Since then, some of the most radical changes have included a moratorium on grid interconnection for new plants, the introduction of fees to access the grid and the introduction of fees for the generation of renewable energy. Austrian energy group EVN filed an ICSID claim against Bulgaria in July 2013 related to the country's electricity pricing and renewable energy regimes.[20]

What Are the International Remedies?

Investor–state arbitration is an attractive option, which provides a specialised and neutral forum within which to bring disputes against a state. It is often not necessary to exhaust local remedies or to commence any domestic litigation before bringing an investor–state arbitration action. However, an investor's ability to bring a claim will depend generally upon the ownership structure of the affected investment vehicle.

Some investors will have recourse through BITs. Spain is a signatory to 80 BITs, the Czech Republic to 113, Italy has 100, Greece has 44, Romania has 103 and Bulgaria has 63.[21] BITs are designed to promote and protect investments by investors of the other state party to the treaty. Most BITs protect a broad range of investments, which encompass all assets. Renewable energy companies typically hold shares in a locally incorporated company that holds rights or licences conferred by law—such investments are likely to be within the protection of investment treaties. Financial institutions that have financed renewable energy investments also can benefit from investment treaty protections as covered investments include loans and claims to money or claims to performance pursuant to a contract having an economic value.

The investor's nationality is typically determined by the place of incorporation and/or the seat of company management in the case of companies and by the domestic law on citizenship in the case of individuals. Many BITs permit investors to make claims for directly or indirectly held investments as well as minority shareholdings. Thus parent companies or individual shareholders are often able to assert rights relating to an investment held through a subsidiary company. Some also provide that juridical persons incorporated in the host state but controlled by nationals of the other contracting state may be treated as foreign nationals. This provides the investor with options when deciding under which treaty to bring the claim.

Investors may also have claims under the ECT. The ECT is a multilateral treaty with 52 signatories.[22] It outlines the principles for cross-border cooperation in the energy industry and provides protection for investors in this sector. Spain, Italy, Greece, the Czech Republic, Romania and Bulgaria as well as the EU are signatories to the ECT. This provides the option of joining the EU itself to claims against member states, although execution of an award against EU assets may be more difficult to realise.

There are several investment protections available under the ECT. The fair and equitable treatment standard is the most frequently invoked standard in investment disputes and is likely to be the strongest head of claim in a dispute of the type explained above. The standard is fact-specific and has been breached by: (i) actions or omissions that violate the investor's legitimate expectations relied upon by the investor to make the investment; (ii) conduct that is not transparent or consistent and creates an unstable or unpredictable legal framework or business environment for the investment; (iii) conduct that violates due process or results in a denial of justice; (iv) discriminatory action; (v) interference with a contract; (vi) bad faith or (vii) harassment or coercion. The first two iterations of the fair and equitable treatment standard are most likely to be implicated here. The investor's legitimate expectations can be based on the host state's legal framework, contractual undertakings, and any undertakings and representations made explicitly or implicitly by the host state. Changes in the legal framework may be considered breaches if they represented a reversal of assurances made by the host state to the foreign investor.

Investors who have seen their entire investment wiped out, or almost entirely wiped out, also may have recourse to the protection against illegal expropriation. The ECT requires that the expropriation of foreign-owned property must be (i) for a public purpose, (ii) non-discriminatory, (iii) in accordance with due process and (iv) accompanied by prompt, adequate and effective compensation equivalent to the fair market value of the expropriated investment before the expropriation became known. A government measure would constitute an expropriation if it effectuated a permanent loss of the economic value of an investment.

There are various other protections under the ECT, which, depending on the circumstances of each individual case, may be invoked. For instance, the ECT guarantees that investments be accorded "most constant protection and security", which can be violated by drastically altering the legal framework for the investments. Another protection provided under the ECT is the legal obligation on a host state not to impair the management, maintenance, use, enjoyment or disposal of investments by "unreasonable or discriminatory measures". The ECT also contains a broadly worded umbrella clause that guarantees the observance of obligations assumed by the host state vis-à-vis the investor or his investment.

There are many advantages to investor–state arbitration. Investors typically seek monetary compensation. In some cases, investors would be entitled only to the amount invested plus costs and expenses. Lost profits will usually be awarded if the investment has a record of profitability or there are other indicia of future profits. Arbitral awards are binding upon the parties and create an obligation to comply with them. Most states comply with awards voluntarily. In the event a party fails to comply with an award, one of the major advantages of arbitration (as opposed to litigation) is the international enforceability of arbitral awards compared with foreign court judgments. It may also be possible to secure third-party funding for the costs of the dispute and/or to bring the claim with a group of similarly affected investors.

It is also worth noting that the European Commission ("EC") has sought to intervene in an increasing number of investor–state claims brought by EU nationals against member states. The EC has voiced opposition to intra-EU BITs, i.e., BITs between EU member states. The EU also has disputed the applicability of the ECT to intra-EU disputes. In one case, the EC even issued an injunction barring a member state—Romania—from paying the award in the Micula v. Romania ICSID case[23] on the ground that it constitutes state aid and is thus illegal under EU law.[24] That injunction is likely to remain in place until the EC rules on the ultimate compatibility of that aid with the European single market.[25] While the play-out of the EC's intervention remains to be seen and can certainly complicate an arbitration, it is by no means a bar to bringing a claim. In 2014, 16 percent of all investment arbitrations brought globally were intra-EU in nature.[26]

This remains a rapidly evolving and contentious area, although there is little doubt that many investors have been severely affected by the proliferation of changes to the renewables sector across Europe. Many have already turned to investor–state arbitration as the most reliable mechanism for recouping their losses.

Lawyer Contacts

Jones Day lawyers have decades of experience in bringing and defending investor–state energy claims, including specific experience in the energy sector in Eastern Europe. We would be happy to discuss options with any current or prospective clients who have suffered losses to their renewables portfolio. For further information, please contact your principal Firm representative or one of the lawyers listed below. General email messages may be sent using our "Contact Us" form, which can be found at

Baiju S. Vasani
London / Washington
+44.20.7039.5121 / +1 202.879.3888

Sylvia Tonova

Paul Exley

Mercedes Fernández

Franco Lambertenghi

Rona C. MacRae, a staff attorney in the London Office, assisted in the preparation of this Commentary.

Jones Day publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our "Contact Us" form, which can be found on our website at The mailing of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship. The views set forth herein are the personal views of the authors and do not necessarily reflect those of the Firm.

[1] See UNCTAD, Recent Developments in Investor–State Dispute Settlement (Apr. 2014), at 1.

[2] See Marc Roca, "Spain Targets First Cash From Renewables With Energy Tax", Bloomberg Business, 12 Jul. 2012,

[3] See Nico Tyabji, "How to Lose Investors and Alienate People in Renewable Energy", Bloomberg New Energy Finance, 10 Apr. 2013,

[4] See Kyriaki Karadelis, "Spain Again: Seventh Renewables Claim at ICSID", GAR, 5 Aug. 2014,

[5] See Douglas Thomson, "What You Missed at ICSID", GAR, 12 Jan. 2015,

[6] See Vyoma Jha, "Trends in Investor Claims Over Feed-in Tariffs for Renewable Energy", Investment Treaty News, 19 July 2012,; Luke Eric Peterson, "Solar Investors File Arbitration against Czech Republic; Intra-EU BITs and Energy Charter Treaty at Center of Dispute", IAReporter, 15 May 2013,

[7] Id.

[8] See Kyriaki Karadelis, "Italy Risks Claims over Solar Subsidies", GAR, 8 Dec. 2014,

[9] See Kyriaki Karadelis, "Sun Rises on Czech Energy Claims", GAR, 19 Feb. 2014,

[10] See Volker Uphoff, "Italy: Conto Energia V brings cuts to incentives for the PV sector", Sun & Wind Energy – the Magazine for Renewable Energies, 23 Jul. 2012,

[11] Kyriaki Karadelis, "Italy Risks Claims over Solar Subsidies", GAR, 8 Dec. 2014,

[12] Id.

[13] Id.

[14] See Policy paper on retrospective changes to RES Legislations and National Moratoria, 20-20 Keep on Track, May 2013, at 10-11,

[15] See Nico Tyabji, "How to Lose Investors and Alienate People in Renewable Energy", Bloomberg New Energy Finance, 10 Apr. 2013,

[16] See Ilias Tsagas, "Romania Halves Certificates for Solar PV Starting January 2014", PV Magazine, 31 Jan. 2013,

[17] See Kyriaki Karadelis, "Italy Risks Claims over Solar Subsidies", GAR, 8 Dec. 2014,

[18] See Kyriaki Karadelis, "EVN files ICSID claim against Bulgaria", GAR, 4 Jul. 2013,

[19] Id.

[20] Id.

[21] See ICSID Database of Bilateral Investment Treaties, available at

[22] Status of Ratification of the Energy Charter Treaty as of June 2013

[23] Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania, ICSID Case No. ARB/05/20, Final Award dated 11 Dec. 2013.

[24] See Luke Eric Peterson, "European Commission Enjoins Romania from Paying ICSID Award, Thus Throwing a Wrench into Enforcement of Intra-EU BIT Ruling", IAReporter, 7 Aug. 2014,

[25] Id.

[26] 26 See UNCTAD, IIA Issues Note: Recent Trends in IIAS and ISDS (Feb. 2015), at 6.