The Paris accord remains big news in the fields of energy and climate change. President Trump’s decision to cease all participation in the accord attracted international condemnation, with a host of G8 economies and the EU reaffirming their commitment to multinational agreement. The question of how states will meet their environmental targets while ensuring energy security for growing populations will have to be answered in the coming years. Will increasing numbers of states seek to attract investment in renewables through measures such as those introduced by Spain and Italy in the early 2000s? Measures which, having been subsequently altered, led to a raft of investment treaty claims against those states.

As we wrote in the 2017 edition of this review, the tribunal’s decision in Charanne B.V. and Construction Investments S.á.r.l v Kingdom of Spain (Arbitration No. 062/2012) (Charanne) gave a measure of hope to Spain, and perhaps other states facing similar Energy Charter Treaty (ECT)[1] claims. Two further awards involving claims against Spain have now been made publicly available, but was Charanne the sun setting on Spanish solar arbitrations, or merely an eclipse?

This chapter addresses the increasing body of arbitrary decisions in the field of photovoltaic energy plant incentives (and their subsequent amendment/withdrawal). We analyse whether those decisions represent a pattern, allowing states and/or investors to obtain a degree of certainty as to what measures are likely to be considered a breach of the protections provided by the ECT, or indeed other bilateral investment treaties.

Spain’s legislative history and Charanne

During 2007 and 2008, Spain’s Ministry of Industry, Energy and Tourism promoted its solar energy sector with a campaign under the slogan ‘The sun can be yours.’ Among the measures included in the ‘Special Regime’ put in place through Royal Decrees (RD) 661/2007 (RD 661/2007) and RD 1578/2008 were (i) a specified feed-in tariff for a 25-year period, following which certain generators would benefit from 80 per cent of the feed-in tariff; (ii) an entitlement to distribute all energy generated to the Spanish electricity grid; and (iii) no limitation on the operating hours of generators.

Spain’s promotional drive was incredibly successful in attracting investment and that, in part, caused the issues that the country now faces. This, coupled with the effect of the global financial crisis on the Spanish economy, led Spain to (initially) enact two further pieces of legislation in 2010, both of which had a substantial impact upon the Special Regime. RD 1565/2010 removed the applicability of the feed-in tariff to generators after the 26th year of the solar plant’s life (subsequently increased to 30 years) and added the requirement that certain plants install mechanisms to protect the electricity grid from voltage dips. RD 1614/2010 together with Royal Decree-Law (RDL) 14/2010 introduced a limit on the operating hours subject to the feed-in tariff and a charge of €0.5/MW for access to the transmission grid.

In spite of these measures, the Spanish government became increasingly concerned by the growing tariff deficit – ie, the difference between the costs of the subsidies paid to the renewable energy producers and the incoming revenue from energy sales. Following elections in 2011, the newly formed government identified the issue almost immediately, with the president indicating that the deficit had reached €22 billion. This led to a number of legislative measures, the most significant of which were as follows:

  • Law 15/2012 – imposed a 7 per cent tax on the value of all energy fed into the National Grid by electricity producers. This was adopted without prior notice to solar power producers.
  • RDL 9/2013 – repealed RD 661/2007 and eliminated the entire regime in respect of fixed tariffs and premiums. In its place a system was adopted based upon specific remuneration measured against hypothetical ‘standard’ costs per unit of installed power, plus ‘standard’ amounts of operating costs.
  • Law 24/2013 – superseded the previous 1997 Electricity Law and removed the distinction between the ordinary and special regimes.
  • RD 413/2014 – replaced the special regime with a regime based upon investors receiving a set ‘reasonable return’ based upon a further hypothetical, this time in the form of a hypothetical ‘efficient’ photovoltaic plant.
  • Ministerial Order IET/1045/2014 – set out the specific remuneration parameters to be applied to the new regime.

The Spanish government’s legislative action during the course of 2013 and 2014 applied retrospectively to plants financed and created under the principles applicable to the original Special Regime as created by RD 661/2007.

As detailed in our previous contribution to the 2017 edition of this review, in Charanne Spain was successful in defeating the first ECT arbitration to be determined in relation to certain of the legislative actions detailed above. In that arbitration, the claimants pursued their claims under articles 10(1) and 10(12) (Fair and Equitable Treatment) and article 13(1) (Expropriation) of the ECT. The majority of the tribunal rejected the claimants’ argument that the reduction of the benefits available until only the 26th year of operation would deprive them of the entirety of the benefits of their investment (as the lifetime of the solar power plants was 35-50 years). First, they considered that the claimants had not submitted enough evidence to support their contentions in relation to the life of the plants and, in fact, considered the lifetime to be more akin to 25-30 years. The tribunal went on to consider whether the ‘legal order in force at the time’ – ie, the Special Regime – was capable of creating legitimate expectations that the legislative framework would not change during the course of the regulatory life of the plants. The majority considered that it was not, given that no specific promise to this end was provided by the state, either directly to the investors in this case, or in respect of the promotional materials provided to all investors in 2007. The majority noted that, to decide otherwise would mean ‘any modification in the amount of the tariff or any limitation on the number of eligible hours would then constitute a violation of international law’.[2]

However, of critical importance in that case (and for both the state and other investor claimants against Spain) was the fact that the claimants relied only upon the legislative measures adopted in 2010, and not the 2013 measures summarised above. The 2013/2014 measures were the subject of two arbitrations under which final awards have been rendered. These are summarised below.

Eiser Infrastructure Limited and Energia Solar Luxembourg Sarl v Kingdom of Spain (ICSID Case No.ARB/13/36) (Eiser)

As in Charanne, the claimants in Eiser brought their claims pursuant to articles 10(1) and 13(1) of the ECT. The claimants had invested about €126million into the development of three photovoltaic plants on the basis of inducements and promises made by the Spanish government of the time. Eiser focused, in particular, on the Special Regime created by way of RD 661/2007. The claimants submitted that, at the time of deciding to invest, they held reasonable expectations of a stable regulatory framework (based upon their own expert advice and the ‘The sun can be yours’ promotional materials circulated by Spain). As a result they had leveraged their investments with substantial non-recourse loans.

For its part, Spain put forward a number of jurisdictional objections, as it had done in Charanne. All but one of these objections were dismissed by the tribunal, with only the objection to a claim posited by the claimants based on a tax measure being upheld on the basis that such a measure was carved out of the ECT. As to the merits, in relation to the expropriation claim under article 13(1), Spain submitted that the claimants still retained their shareholdings in the Spanish companies that owned the solar plants that were and would continue to receive large revenues from both energy sales and government subsidies.

In respect of the Fair and Equitable Treatment claim under article 10(1), Spain adduced three high-level defences.

  • Spain was entitled to alter its regulatory system to meet the economic challenges it faced in respect of the growing tariff deficit. It did so in a manner that was fair and guaranteed investors a reasonable return.
  • Investors (including the claimants) were only ever entitled to a reasonable return and, by contrast, the previous Special Regime had over-compensated the photovoltaic plants.
  • The claimants had chosen to invest in overpriced and overleveraged solar plants and, in the event that the new regulatory environment did not provide them with a satisfactory return on their investment, this was a result of their own mistakes in respect of structuring and financing.

On the basis of judicial economy, the tribunal elected to address the breach of the duty to provide fair and equitable treatment only, on the basis that it was the most appropriate legal context for assessing the complex factual situation. The tribunal began its analysis by reiterating the well-known mantra that ‘absent explicit undertakings directly extended to investors and guaranteeing that states will not change their laws and regulations, investment treaties do not eliminate states’ right to modify their regulatory regimes to meet evolving circumstances and public needs’.[3] Consequently, the tribunal (as in Charanne) rejected the claimants’ contention that RD 661/2007 provided them with immutable economic rights that could not be altered by changes to the regulatory environment.

The tribunal indicated that the measures complained about in Charanne ‘had far less dramatic effects than those at issue’[4] in Eiser. The tribunal went on to determine that the ECT did protect the claimants from the ‘total and unreasonable change’[5] that they experienced as a result of the Spain’s legislative action in early 2013/2014. The measures adopted by Spain implemented an entirely new regime based upon assumptions different to those provided for in the 2007 legislation. That new regime had retroactive effect and was intended to significantly reduce subsidies paid to existing plant owners.

In particular, the tribunal determined that article 10(1) protected the claimants from a ‘fundamental change to the regulatory regime in a manner that does not take account of the circumstances of existing investments made in reliance on the prior regime’.[6] Article 10(1) entitled the claimants to expect that Spain would not suddenly revise the regulatory regime upon which their investments were based to such a degree that all value in them was lost. The claimants were found to have legitimate expectations that such Spain’s legislative actions would not destroy the value of their investment, which is what the tribunal determined had occurred.[7] Importantly, those expectations were found to be based upon not only the 2007 legislative framework, but also further official actions of the state between 2010 and 2011 that had confirmed that the claimants’ plants would continue to receive the original favourable regulatory regime.[8]

Consequently, the tribunal determined that damages ought to be awarded based on the reduction in the fair market value of the investments, to be determined according to the current value of the past and present cash flows that had been lost on account of the 2013-2014 measures. The tribunal largely concurred with the claimants’ expert evidence on valuation (on a discounted cash flow basis), although it reduced the compensation sought by the claimants given that they had determined their damages on the basis of a 40-year life of the plants, which they had failed to establish. The tribunal awarded the claimants €128 million in damages, together with monthly compound interest of 2.07 per cent from June 2014 to the date of the award, and 2.5 per cent from the date of the award.

While Eiser has taken steps to enforce the award, particularly in the United States, Spain has also made an annulment application at ICSID. The basis of that application includes a failure to state reasons and a manifest excess of power, based upon the finding of a breach of article 10(1) in circumstances where the tribunal held that Spain had a sovereign right to amend its legislation and had made no commitments as to a stable regulatory environment. Spain’s application also takes aim at the claimant’s nominated arbitrator, Stanimir Alexandrov, in accusing him of breaching his obligation of independence and impartiality by failing to disclose a longstanding relationship with the claimants’ valuation experts. No doubt the success or otherwise of this application will be addressed in the 2019 edition of this review.

Isolux Netherlands, BV v Kingdom of Spain (SCC Case V2013/153) (Isolux)

On the basis of the awards in Charanne and Eiser, it might be tempting to conclude that claims on the basis of a breach of article 10(1) based upon Spain’s 2012-2014 measures are likely to be successful, with claims based solely on the 2010 measures failing. However, it is of course not that straightforward in the field of investment treaty arbitration. In the 2017 edition of this review we noted that reports had indicated that Spain had succeeded in defeating another ECT claim, Isolux. During the course of the last 12 months the Spanish-language version of the award has been made public. Of particular interest for those monitoring the Spanish solar arbitrations is the fact that the claims made by the claimant in Isolux were similar to those made in Eiser, specifically a claim of breach of article 10(1) on the basis of the 2012-2014 measures. However, as summarised below, the tribunal determined that those same measures that constituted a breach in Eiser did not amount to a breach in this case.

The tribunal rejected almost all of Spain’s jurisdictional objections, including objections based upon another amicus curiae brief submitted by the European Commission (EC). However, like the Eiser tribunal it accepted that it did not have jurisdiction to consider the 2012 tax measures.

The tribunal then turned to the investor’s substantive claims. As in Charanne, the tribunal held that a crucial element of determining an investor’s legitimate expectations concerns is the extent of the due diligence undertaken in advance of the decision to invest. Such due diligence need not be exhaustive, but the expectations put forward in such a claim ought to be measured against the information the investor ought (reasonably) to have known prior to investing. On the facts, the parties disputed the date upon which the investors’ legitimate expectations were said to arise. While the claimant asserted they should be determined by reference to the decision to invest – that being June 2012 (when the Spanish and Canadian parent companies decided to relocate the Spanish solar assets with the Dutch entity which eventually became the claimant). Spain contented the appropriate time was the date upon which the restructuring took place – that being October 2012. This date was only a few weeks before Spain passed Law 15/2012 placing a 7 per cent tax on electricity production. Critically, the tribunal agreed with the State. It then followed that the claimant could not have possessed legitimate expectations that the regulatory environment initiated in 2007 would not be subject to substantial change; indeed, by October 2012 the environment had already experienced a number of changes detrimental to investors. In 2009 the Spanish Supreme Court had made clear that the only limit to the government’s legislative powers, in respect of amendments to the 2007 regime, was to ensure that ‘reasonable returns’ could be achieved for renewable energy producers. It was held (by the majority of the tribunal) that this was the only legitimate expectation attributable to the claimant at the time of investing. The majority further stated that, as at October 2012, all investors in the Spanish solar energy industry knew or ought to have known that the abolition of the Special Regime was a real possibility.[9]

The tribunal also rejected the claimant’s claim for a breach of article 13(1) on the basis that the returns achieved by the plants were higher than those it had expected as at the time of the investment.

The Isolux award is interesting in its focus upon the date upon which the investor’s legitimate expectations arose and what factors such expectations would have taken into account. As considered later in this chapter, could it be said that the tribunal’s approach in this arbitration provides a potentially important piece of the framework to predict the outcome of other Spanish solar cases?

Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v Italian Republic (ICSID Case No. ARB/14/3) (Blusun)

Of course, Spain is not the only state facing ECT claims in respect of its renewable energy industry. At the time of writing, the authors are aware of nine ECT claims against Italy and seven such claims against the Czech Republic. A final award has now been made public in respect of one such claim against Italy, summarised below.

As with Spain, in order to promote renewable energy sources in line with the EC’s objectives (under 2001/77/EC), Italy implemented Legislative Decree 387/2003 which provided for a remuneration system for solar power plants based on fixed feed-in tariffs. Under similar circumstances to Spain, the promotion of renewable energy in Italy led to an influx of investors in the solar sector. This caused Italian central and local authorities to implement various pieces of legislation, leading to several cases being brought against Italy under the ECT.

Blusun, a company incorporated in Belgium, and its two shareholders, Jean-Pierre Lecorcier and Michael Stein, sought compensation from the Italian Republic on the basis of (a) failing to create stable, equitable, favorable and transparent conditions in the energy sector in Italy in accordance with article 10(1); (b) frustrating their legitimate expectations of fair and equitable treatment; and/or (c) subjecting their assets to measures having an effect equivalent to nationalisation or expropriation in breach of article 13(1).

The claimants alleged that as a result of these failures, their investment in a 120-megawatt solar energy project in Puglia, Italy ,was undermined. Total damages were estimated at €187.8 million.

Italy denied these allegations on both merits and jurisdictional grounds. Specifically, they submitted that the tribunal should decline jurisdiction on the basis that:

  • the project did not meet the conditions of an ‘investment’ that can be protected under the ICSID and/or the ECT; and/or
  • the alleged investment was created in violation of the national law; of the national and international principles of good faith; and of the ECT rules on environmental protection.

Italy further submitted that the tribunal should decline jurisdiction on the basis that the claimants were barred from seeking relief due to their unlawful conduct when constituting what Italy claimed was an illegal investment.

The tribunal rejected Italy’s jurisdictional arguments. It noted that article 1(6) contains ‘a typically broad definition of “investment”’[10] encompassing ‘any investment associated with an Economic Activity in the Energy Sector’,[11] including ‘[the] construction and operation of power generation facilities, including those powered by wind and other renewable energy sources’[12] There was therefore ‘no doubt’[13] that the project fell within article 1. The same considerations led the tribunal to conclude that the project also constituted an ‘investment’ for the purposes of the ICSID Convention.

As to Italy’s allegations of illegality, while the tribunal accepted that the ECT ‘does not lay down an explicit requirement of legality’[14] it accepted that it would not cover investments that were ‘actually unlawful under the law of the host state at the time’[15]. Italy’s complaint was that the claimants had made use of a regulatory procedure (the ‘DIA’ procedure) that was meant to be available only to smaller solar plants by artificially separating the project into a number of less sizeable plots. The tribunal, however, found that the claimants had never misrepresented the nature of the project, and had repeatedly listed it with the relevant agencies without any attempt at deception. As a result, Italy’s second jurisdictional argument also failed. The tribunal also rejected Italy’s argument concerning the claimants’ failure to conduct an Environmental Impact Assessment (EIA) pursuant to the purported requirement to do so under Article 19. In doing so, the tribunal asserted that article 19 only operates at the interstate level, and that any requirements for investors to conduct EIAs can only arise ‘under the relevant national law’.[16]

The tribunal then went on to consider the claimants’ case on the merits. These focused on four events which they asserted created damaging legal instability which undermined the success of the project. These were:

  • a decision of the Constitutional Court in 2010 which restricted the DIA procedure to plants of less than 20 KW, which the claimants said created uncertainty over the status of larger plants that had already been approved;
  • the ‘Romani Decree’ in 2011 which restricted the circumstances in which solar plants could benefit from feed-in tariffs;
  • the ‘Fourth Energy Account’ which further limited the circumstances in which solar plants would be eligible for feed-in tariffs and required plants of a certain size to sign up to ‘lists’, which the regulator frequently changed; and
  • a ‘stop-work order’ made ultra vires against the project by the local authority, which was subsequently annulled by the Regional Administrative Court.

The tribunal considered the circumstances in which a country may be said to have breached its obligation under article 10(1) to ‘encourage and create stable, equitable, favourable and transparent conditions for Investors’ by modifying its regulatory framework. Notably, the tribunal moved away from the tripartite criteria proposed in Charanne of public interest, unreasonableness and disproportionality, in favour of a single test based on disproportionality alone:

Of the three criteria suggested in Charanne, ‘public interest’ is largely indeterminate and is, anyway, a judgement entrusted to the authorities of the host state. Except perhaps in very clear cases, it is not for an investment tribunal to decide, contrary to the considered view of those authorities, the content of the public interest of their state, nor to weigh against it the largely incommensurable public interest of the capital-exporting state. The criterion of ‘unreasonableness’ can be criticised on similar grounds, as an open-ended mandate to second-guess the host state’s policies. By contrast, disproportionality carries in-built limitations and is more determinate. It is a criterion which administrative law courts, and human rights courts, have become accustomed to apply to governmental action.[17]

The tribunal continued, stating that the requirement for equitable treatment ‘incorporates the fair and equitable treatment standard under customary international law and as applied by tribunals’[18].That ‘in the absence of a specific commitment’[19], the state has ‘no obligation’[20] to grant or maintain subsidies, but that any modification should be done ‘in a manner which is not disproportionate to the aim of the legislative amendment, and should have due regard to the reasonable reliance interests of recipients who may have committed substantial resources on the basis of the earlier regime.’[21]

On the facts of the case, the tribunal held that none of the regulatory changes highlighted by the claimants had been disproportionate, nor had Italy made any ‘special commitments’[22] which might justify the claimants’ suggestion of ‘legitimate expectations’. In any event, the tribunal held that the claimants had failed to show that the State’s measures were the ‘operative cause’[23] of the project’s failure, which the tribunal heavily attributed to the claimants’ inability to obtain sufficient finance.

This left only the claimants’ indirect expropriation argument pursuant to article 13. This claim focused on the fact that the claimants had purchased land at a premium on the mistaken basis that they could subsequently use that land for the project. The tribunal noted that this argument rested on the assumption that the failure of the project was properly attributable to the State – an assumption which the tribunal had already dismissed. On that basis, a majority of the tribunal found in favour of the Italy. A dissenting opinion was included from Stanimir Alexandrov, the claimants’ nominated arbitrator. Mr Alexandrov stated that the regulatory measures constituted expropriation, further expressing his concern in the majority’s conclusion that the project would have failed regardless of land use restriction.[24]

The claimants have submitted an application to annul the award, and (at the time of writing) those proceedings are ongoing.

While Blusun has no binding effect on other tribunals constituted under the ECT, the merits decision is potentially significant for both Italy and investors seeking to bring claims under the ECT. The tribunal’s departure from (and criticism of) the principles of ‘public importance’ and ‘reasonableness’ proposed in Charanne, and subsequently adopted in both Eiser (on public importance) and Isolux (on reasonableness) is noteworthy, although ultimately the decisions indicating that a state’s right to legislate does not automatically breach fair and equitable treatment protections were broadly consistent (the tribunal in Eiser simply determined that Spain’s 2013/2014 actions went too far). Blusun can, therefore, be viewed as a continuation of arbitral awards supporting a state’s right to regulate and the importance of sovereignty.

Another interesting aspect of Blusun was that, as in Charanne and other intra-EU investment treaty cases,[25] the European Commission submitted an amicus curiae brief in respect of jurisdictional challenges based on EU law. As in previous cases, the EC submitted that intra-EU investments fall within the exclusive jurisdiction of EU law and its institutions, and not to investment-treaty arbitration. The tribunal dismissed the notion that the ECT and EU law are contradictory with regard to the jurisdiction of intra-EU disputes. The tribunal held, having referred to a number of other cases, that ‘the effect of these decisions is a unanimous rejection of the intra-EU objection to jurisdiction’.[26] The 2017 edition of this review addressed the potential options available to the EC in the face of invest treaty tribunals’ consistent rejection of such interventions and/or the implicit disconnect argument proffered by states based on EU-law. The strong terms with which a pre-eminent tribunal rejected the EC’s argument demonstrates the degree to which the EC’s position could now be seen as untenable.[27] However, the EC’s ‘ace-in-the-hole’ may remain its position that EU member states cannot pay compensation in the case of intra-EU disputes on the basis that to do so would amount to state aid.

Do these Awards provide certainty to states and/or Investors?

Do Charanne, Isolux, Eiser and Blusun provide something of a road map for state legislative action altering favorable investment incentives? Perhaps. They at the very least demonstrate that investment treaty tribunals will, by and large, concur with the line of arbitration decisions that support the proposition that fair and equitable treatment protections, such as that contained in Article 10(1) of the ECT, do not preclude a state making amendments to its regulatory environment. The caveats to that position appear to be (i) an absence of specific assurances that the regulatory regime applicable at the time of the investment would remain in place for the lifetime of that investment, and (ii) as stated in Blusun, that any such changes ‘should be done in a manner which is not disproportionate to the aim of the legislative amendment, and should have due regard to the reasonable reliance interests of recipients who may have committed substantial resources on the basis of the earlier regime’.[28] From the investor side, this could be said to provide protection to the extent that it can prove that it held a legitimate expectation that allegedly infringing legislative action reducing the value of its investment would not come to pass; as shown in Isolux, the exact date upon which those expectations were formed is likely to be crucial.

However, is it that simple? Can states be assured that they will not face a raft of successful (and, even if unsuccessful, expensive) claims based upon measures perceived to be necessary in the face of factors such as the tariff deficit faced by Spain by the end of the 2011? Perhaps regrettably for states, the answer is – no. As the readers of this review will know very well, there is no system of precedent in investment treaty decisions; one panel of highly distinguished arbitrators may well interpret the effect of such legislative provisions differently to another, equally eminent, tribunal. Further, the decision in Eiser is a significant blow to Spain, which still faces dozens of other investment treaty arbitrations based upon the royal decrees and laws passed between 2010 and 2014. Investors with claims based upon the 2013/2014 legislation who made their investment in advance of, at least, the 2010 measures, will be buoyed by that award. Those investors with claims against other states may well be feeling similarly confident. Those same investors are unlikely to find their mood changed by Spain’s annulment application in Eiser.

Lessons to be learnt by states and Investors in respect of renewable energy investment?

So, where do these cases leave states? Will the availability of investor-state arbitration under treaties such as the ECT dissuade states from offering incentives in respect of the initial capital inflow for renewable energy projects? This is perhaps unlikely in light of the Paris Accord and the momentum of states (other than the USA) to significantly reduce emissions. That said, it is not impossible that more states will follow Italy’s lead and withdraw from the ECT through article 47 (allowing withdrawal after five years of membership, and following a period of one year’s notice). While Italy’s withdrawal was justified on the basis of reducing the budget costs of membership of international organisations, it has been suspected that the decision was taken as a result of the measures summarised above in relation to Blusun and the likely influx of claims under the ECT. However, Italy’s withdrawal has not guaranteed it protection from such claims, nor would it do so for other states that have already put in place a ‘favourable’ regulatory environment for investors in their renewable energy sectors. This is because, like many bilateral and multilateral investment treaties, the ECT contains a sunset provision[29] meaning that parties who made their investments prior to withdrawal will benefit from the provisions of the ECT, including the dispute resolution procedures, for a period of 20 years following withdrawal. Potential claimants have until 2036 to bring claims against Italy in respect of the legislative actions summarised above in respect of Blusun. To the extent that states do wish to follow this route, they would need to give notice of withdrawal well in advance of instigating any significant promotional activity with a view to increasing investment in their renewable energy sectors.

What is perhaps more likely is that states will place explicit caveats providing for the alteration of the legislative framework and/or incentives in place at the time of the initial investments. States may also leave open the ‘window’ of initial investment for a shorter period of time to avoid the issues that became readily apparent in the case of Spain between 2007 and 2011. Such planning may have the effect of providing a modicum of protection for states should the need arise to make (substantial) changes to its legislative framework in response to changing economic factors. However, such caveats are unlikely to create the optimal environment in which foreign investors to risk capital; returns are likely to be lower and less certain if a state specifically reserves the right to alter the regulatory environment that would encourage an exponential increase in investment in the first place.

And what about investors? Charanne, Eiser and Isolux all make clear that the recording of the basis of an investment decision (and its financing) is critical in respect of a claim for breach of the fair and equitable treatment standard. Such action ought to enable the fixing of a date upon which legitimate expectations of a specifically attainable return on the investment arose. As demonstrated in the cases considered in this article, that date can be critical given that the same measures that amounted to a violation of the standard in Eiser did not yield the same result for the investors in Isolux on the basis of when their (alleged) legitimate expectations arose.

Ultimately, there remain dozens of cases against a number of states based upon the implementation and subsequent alteration of incentives and regulations in support of renewable energy investment. The cases considered above demonstrate that while certain patterns may emerge in terms of the approaches that investment treaty tribunals are likely to adopt in respect of alleged breaches of the ECT, each case will always be considered on its own specific facts. While it appears that tribunals are, by and large, consistent in their consideration that article 10(1) does not preclude a state from exercising sovereign rights to amend its laws (absent specific commitments to investors not to do so), there is a limit, as demonstrated in Eiser. Where that limit is, remains in the laps of the arbitrators.