Time.News | 21 April 2023
A US fund declares Spain in “technical default” and claims almost 1,000 million government bonds
The US fund Blasket Renewable Investments has activated the “default” clause that declares Spain at “technical impact” after the Government has not yet paid the pending awards for the cuts in the premiums for renewables. The fund’s decision comes after Spain has not been able to reach agreements in different awards due to the cut in premiums for renewables, which total close to 1,000 million euros. The clause activated by the American investment fund Blasket means that these public debt issues, specifically four for a value of 910 million euros, must be immediately repaid to creditors, along with the corresponding interest, according to Bloomberg reports.
A claim of this type, which demonstrates the solvency and financial capacity of the State, has not been made since the 1930s. Specifically, there are no records of a similar situation since 1936, just before the outbreak of the Spanish Civil War. Not even in any of the countries of the European Union is there evidence of similar situations, except for the non-payment that led Greece to be intervened by community men in black for not being able to repay installments of the International Monetary Fund (IMF) funds, in 2015.
The government has already denied that the possible claim “has nothing to do with the State’s debt”. Sources from the Ministry of Economy indicated that any initiative, by any channel against the Kingdom of Spain based on these awards, will have “a response in the appropriate sphere because Spain’s position is very well established and of course it has nothing to do with the state debt”. Bloomberg indicated that the fund noted that Spain’s non-payment has triggered cross-default provisions in the bond contract that means that the country is in technical ‘default’.
Blasket wants Spain to speed up the payment of a debt issue of some 248 million dollars (about 226 million euros) due in 2029, after the Government of Pedro Sánchez did not reach an agreement for about 1,200 million dollars (about 1,094 million euros) in arbitration awards due to cuts in the past to the premiums for renewable energy. The program includes three other outstanding issues, in dollars, yen and euros, for an amount of 817 million dollars (about 745 million euros) with similar default wording. This means that Spain could face early debt rescue requests equivalent to about 1,100 million (about 1,000 million euros).
Specifically, this claim has to do with the awards in renewable investments for the measures adopted by the Government of the PP in 2012 and 2013, which brought claims before the ICSID, fundamentally, based on the Energy Treaty. Previously, the PSOE government of José Luis Rodríguez Zapatero already applied the first cuts to premiums for renewables.
The same Ministry sources specified that it has been “a long process” in which Spain has logically defended its interests. The legal basis for intra-EU claims has been excluded because the CJEU concluded that intra-EU investment arbitrations are invalid, since investment protection standards are ensured by European regulations. Thus, they stressed that this has meant that the legality of Spain’s arguments “has been highly endorsed.” “However, as always happens with awards, there are other types of interests of those who want to make a profit.”
The same fund led to a UK court at the end of March freeze, after his request, the accounts of the Instituto Cervantes in London and of a foreign trade office of the Generalitat of Catalonia. The Government adopted in 2012 and 2013 a series of measures that cut the premiums for renewables that the previous Socialist Executive had launched, and that it had also cut. In 2013, a legislative reform was approved that reduced the expected profitability of numerous renewable installations, and there were international investors who went to international arbitration courts to denounce Spain. At that time, 51 arbitrations were filed in different courts, most of them before the International Center for Settlement of Investment Disputes (ICSID) – a body dependent on the World Bank – before which they claimed a total of 10,000 million euros.