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

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). Once viewed as the nuclear option, companies now recognise investor-state arbitration as simply another dispute resolution mechanism — albeit one with more teeth — which does not preclude a continuing relationship with the Respondent state.

As governments rolled back feed-in tariffs (FITs) and failed to honour governmental guarantees, investors in the renewable energy sector have seen their investments decimated, or substantially reduced. Many have already turned to investor-state arbitration in an attempt to recoup their investments — 23 percent of known investor-state arbitrations in 2013 arose as a result of renewable energy measures adopted by Spain and the Czech Republic. 

This article 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 2010, the government chipped away renewables incentives, including: (i) limitation on eligible operating hours; (ii) cancellation of the price premium guarantee after 30 years; (iii) revision of the inflation index; (iv) total replacement of the FiTs with a “reasonable rate of return” and (v) imposition of a 7 percent tax on revenues. The government has since been inundated with 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.

The Czech Republic

The Czech Republic introduced generous FIT policies for solar energy, and guaranteed that these would not be lowered by more than 5 percent per year. However, this added pressure to electricity prices, and in 2010 the legislature passed a levy imposing a retrospective “solar tax” of 26 percent on the revenue of all solar energy producers. It also repealed the tax breaks given to solar power plant operators, and increased the fees for land use by 500 percent. As a result, the Czech Republic is now facing at least seven investor-state claims.


Since 2011, the Italian government has reduced FITs and ceased incentives granted to photovoltaic plants located on agricultural land. Italy is already facing its first ICSID claim brought by a solar power investor. Italy also faces potential investment treaty claims from dozens of investors affected by Italy’s approval in August 2014 of a decree that would make retroactive changes to FITs from the beginning of 2015. The changes will affect photovoltaic solar plants with a capacity of more than 200 kilowatts.


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.


The 2008 Renewable Energy Law provided renewable energy plants with green certificate subsidies and preferential buying terms. Romania’s government later judged that this was too generous, and delivered the first statutory hit to renewables in April 2013. The government halved the support awarded to existing hydro, wind and solar power generation under the country’s green certificate scheme, and postponed some green certificates that were due to be allocated to producers. It then cut the level of subsidies for all new projects coming online after 1 January 2014. In September 2014, a group of Czech solar investors filed a notice of dispute against Romania under the ECT.  More are expected to follow.


In Bulgaria, the incentives were generous 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, who passed the cost of the FiTs onto electricity providers. In 2012, the government reduced the FiTs by 50 percent for solar power producers and by 22 percent for wind power producers. 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 while it continues to have local operations. 

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.  Investors may be awarded the amount invested plus costs and expenses, and in some cases, lost profits will also be awarded.

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.  Most BITs protect a broad range of investments, and permit investors to make claims for directly or indirectly held investments as well as minority shareholdings. Renewable energy companies typically hold shares in a locally incorporated company that holds rights or permits 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.

Investors may also have claims under the ECT. Spain, Italy, Greece, the Czech Republic, Romania and Bulgaria are signatories to the ECT.  There are several investment protections available. 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, amongst others: (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.  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 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, or almost entire, investment wiped out also may have recourse to protection against illegal expropriation. A government measure may constitute an expropriation if it effectuated a permanent loss of the economic value of an investment. 

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 honour an award, a major advantage 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.

This article was co-authored with Jones Day’s Sylvia T. Tonova, Senior Associate, London; Paul Exley, Partner, London; Mercedes Fernandez, Partner, Madrid; Franco Lambertenghi, Partner, Milan; and Rona C. MacRae, Staff Attorney, London.

Previous articleEngineering Possibilities Versus Practical Implementation: Utility Portfolios and Business Models
Next articleA Square Cheeseburger in a Round Hole? A Q&A about the Value of Solar
Baiju S. Vasani, a partner in the London and Washington offices of global law firm Jones Day, is an international arbitration lawyer and arbitrator with particular experience in energy industries.

No posts to display