The European Commission has opened an in-depth investigation into whether Spain can lawfully pay compensation ordered by an arbitration tribunal to Japan’s JGC Holdings Corporation over changes to a renewable electricity support scheme.
Spain set up the support scheme in 2007 to back electricity generation from renewable sources, but it was not notified to the Commission for approval under EU state aid rules, the EU executive said in a statement on Tuesday.
The terms were changed in 2013 and applied to installations already receiving support under the 2007 scheme.
Spain notified the revised scheme and it was approved in 2017, the Commission added.
JGC — a Japanese engineering holding company — invested in renewable energy installations in Spain and received support under the 2007 scheme.
After the changes, the company began arbitration proceedings against Spain seeking compensation for support it said it had lost.
An arbitral tribunal ruled in 2021 that Spain had breached the Energy Charter Treaty — an international agreement covering energy investment protections — and ordered Spain to pay JGC €23.5 million, plus interest and additional costs.
Spain notified the award to the Commission under state aid rules and said it had made a payment linked to the award to Blasket Renewables Investment, a US fund that had been assigned the rights to the award.
Blasket has prepared and envisaged enforcement in the Netherlands and attempted enforcement in the United States and Belgium.
What the Commission is examining
The Commission’s preliminary view is that the arbitration award — and in any event its implementation — constitutes State aid under Article 107(1) of the Treaty on the Functioning of the EU, because it gives JGC an advantage equivalent to benefits under the non-notified 2007 scheme.
It will examine whether the measure is compatible with the EU internal market, citing doubts including whether the aid breaches EU treaties and whether it meets criteria in the EU guidelines used to assess operating aid for renewable energy.
The Commission said it will look at whether the additional support is necessary, has an incentive effect and is proportionate, given the installations already benefited from the 2013 scheme.
It will also examine whether granting support only to JGC could distort competition.
Opening an in-depth investigation allows Spain and interested third parties to submit comments and does not prejudge the final outcome.
