UK court may seize Spanish sovereign assets amid international arbitration quagmire

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Euractiv | 6 April 2023

UK court may seize Spanish sovereign assets amid international arbitration quagmire

By Max Griera

Spanish sovereign assets in London, including the country’s cultural institute premises and its bank accounts and the Catalan government’s embassy building, may be seized as part of a World Bank international arbitration decision against Spain, which faces claims worth €2 billion related to renewable energy subsidy schemes, according to a UK High Court order from 27 March seen by EURACTIV.

The Spanish government slashed a generous renewable energy subsidies scheme back in 2013 to cut down public spending, putting investors who relied on the funds for their projects under financial hardship.

Affected investors have been fighting for compensation at the World Bank’s arbitration body (ICSID), initially amounting to €8 billion but reduced to €2 billion after years of litigation.

The claims have been brought forward under the Energy Charter Treaty, an international convention which allows companies to sue signatory countries over decisions that affect their energy investments.

Out of the 51 existing cases, 21 have been resolved in favour of the investors, while another 24 await a final ruling, Associated Press reports. So far, Spain has refused to pay any outstanding amounts from resolved cases.

ICSID rulings can be enforced in any state party to the arbitration body, such as the UK, where Blasket Renewable Investments LL registered a €40 million compensation that Spain has yet to pay.

Seizure frenzy: Buildings, bank accounts, and official jets

The orders issued by UK’s High Court grant Blasket the option to be compensated with the Spanish cultural embassy premises in London (Instituto Cervantes), its bank accounts, and the Catalan government’s embassy building.

The court order, however, is not definite and can be challenged. “The court does not demand to pay any amount yet, Instituto Cervantes [Spanish cultural embassy] has been granted two months to invoke state immunity”, sources from the Spanish Ministry of Ecological Transition told ABC.

The High Court had previously issued a similar order in favour of investment firms Antin Infrastructures Luxembourg S.r.l and Antin Energia Termosolar BV, which froze €120 million from a €925 million payment due from The London Steam-Ship Owner’s Mutual Insurance Association to Spain as compensation for the 2003 Prestige ship oil spillage.

Investors affected have elaborated further on lists of Spanish seizable assets, which include the government’s official Falcon jets used by Prime Minister Pedro Sánchez and his ministers.

The UK’s Foreign Office declined to comment as “these are ongoing legal proceedings”.

Up to the European Commission?

The Spanish government has refused to pay any outstanding compensation arguing that the payments “may be contrary to EU law and constitute illegal state aid”, a spokesperson from the Ministry of Ecological Transition said.

The government awaits a resolution from the Commission before proceeding with any payment, a standard procedure under EU law.

The Commission preliminarily qualified the Antin payment as illegal state aid in July 2021, according to a letter from the Commission to Spain and Antin seen by EURACTIV. However, the letter also invites both parties to provide arguments to form a final decision, yet to be reached.

Law firm Kobre & Kim, representing Antin among other investors, filed a complaint with the European Ombudsman accusing members of the Commission’s legal service, headed by Spaniard Daniel Calleja Crespo, of bias and conflict of interest in favour of Spain.

In the complaint, investors argue the Commission’s legal service supports Spain in proceedings, while it supposedly conducts an independent state aid investigation.

In January, the UK’s High Court prevented the Commission from participating in the Antin case, arguing that the Commission is “demonstrably not neutral”, the Financial Times reports.

The Ombudsman complaint was closed beginning of March because “the complainant had not first turned to the Commission with their issue, ” an Ombudsman spokesperson told EURACTIV.

The Commission did not respond to a request for comment by the time of publication.

‘The EU is shooting itself in the foot’

This battle comes as the EU is trying to counterbalance the effects of the US Inflation Reduction Act, a subsidy package for electric vehicles, batteries, and renewable energy projects with the potential of hampering green investments in the EU.

Green energy investors argue they fear the safety of investments in the country because of the lack of legal certainty brought by Spain’s refusal to pay the arbitration awards, which undermines efforts to shift to renewable energies.

“If you take the bigger picture, the EU is shooting itself in the foot by supporting Spain in this [avoiding arbitration payments]”, Prof. Dr Nikos Lavranos, a Netherlands-based expert in EU law and investment arbitration, told Associated Press.

“You cannot trust that they can follow through with their agreements, so I think you do shake investors’ confidence”, he added.

source: Euractiv