Infrastructure Services Luxembourg and Energia Termosolar, the investors, are owed €120 million plus interest, after winning an ICSID (World Bank) international arbitration against Spain in 2018.

The arbitrators awarded compensation for Spain’s removal of subsidies for renewable energy investment after significant funds had already been invested into a solar energy project in Andalusia, breaching Spain’s legal obligations under the Energy Charter Treaty, an international investment treaty.

As Spain refused to pay the award, the investors registered it as a judgment of the High Court in London in 2021 to enable them to enforce against Spain’s commercial assets in England. Spain objected to the registration order on grounds that it retained State immunity, and this issue was determined by the UKSC.

In a unanimous judgment, given by Lord Lloyd-Jones and Lady Simler, the UKSC held that Spain has “…submitted to the jurisdiction by virtue of article 54 of the Convention and consequently, they may not oppose the registration of ICSID awards against them on the grounds of state immunity”.

Richard Clarke, barrister at law firm Kobre & Kim, representing the investors in the UKSC, said: “The UKSC adds further weight to the international consensus that ICSID awards must be complied with and enforced by signatory States. 

“The judgment confirms that where states agree by treaty to waive their adjudicative immunity, as in Article 54 of the ICSID Convention, they will not be able raise immunity upon enforcement.

The court also found that the object and purpose of the ICSID Convention supports this outcome of producing binding awards and a reciprocal regime to ensure compliance, which has proven necessary in this case given Spain’s ongoing refusal to pay the award.”

The Supreme Court decision leaves Spain vulnerable to having its commercial assets seized in England if it continues to refuse to pay after today’s ruling.

Despite this, Spain’s Environmental Transition Ministry, responsible for the debt, has refused to pay the investors for nearly eight years (the arbitration was commenced in 2013). Spain also continues to incur millions of euros in legal fees and adverse cost orders in litigating this.

The former minister responsible – Teresa Ribera – has since left the Spanish government and joined the European Commission to lead its competition directorate. The Commission has to date supported Spain’s position, and in a decision of 24 March 2024 found the arbitration award to be state aid, which is the subject of ongoing annulment proceedings in the General Court of the EU.

The UKSC judgment also adds to the list of cases that Spain has lost in other jurisdictions removing its immunity, including the courts of Australia and United States.