EU Commission Investigates Spain's 23.5 Million Euro Payout to Japanese Firm

The European Commission is scrutinizing a 23.5 million euro compensation payment made by Spain to the Japanese firm JGC Holdings Corporation, investigating whether it constitutes illegal state aid. The payment was made following an international arbitration decision after Spain altered its renewable energy support scheme in 2013, significantly reducing previously generous subsidies.

According to the Commission, there are indications that both the arbitration ruling and the subsequent payment may have provided JGC with a financial advantage. This advantage is comparable to that offered by Spain's 2007 renewable energy support regime, which was never notified to Brussels as required by state aid rules. The Commission views this as a potential breach of EU regulations governing state aid.

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There are indications that both the arbitration decision and the subsequent payment may have provided JGC with a financial advantage comparable to that foreseen by the Spanish renewable energy support scheme of 2007, which however had not been notified to Brussels, as required by state aid rules.

The case originates from Spain's 2013 decision to overhaul its renewable energy policies, applying new, less favorable rules even to investments already made under the 2007 framework. While the revised support system was notified and approved by the Commission in 2017, Brussels had cautioned that any compensation awarded through international arbitration due to the 2013 changes could be considered state aid, requiring prior approval.

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The Commission had pointed out at the time that any compensation awarded through international arbitration due to the 2013 changes could constitute state aid and, as such, requires its prior approval.

JGC Holdings, having invested in Spanish renewable energy projects, pursued international arbitration under the Energy Charter Treaty. In 2021, an arbitral tribunal ruled in favor of the company, awarding 23.5 million euros plus interest. Spain eventually paid this sum to Blasket Renewables Investment, an American investment fund to which JGC had transferred its compensation rights. The fund had previously attempted to enforce the arbitration award in courts in the Netherlands, the United States, and Belgium.

The European Commission asserts its exclusive authority to approve state aid within the EU. It argues that the arbitral tribunal effectively overstepped by making the compensation award, substituting its own assessment for that of the Commission. Brussels will now examine whether this payment created an unfair advantage for JGC compared to other investors and if it distorted competition within the European renewable energy market. If the investigation concludes that illegal state aid was provided, the Commission could compel Spain to recover the entire compensation amount from the final beneficiary, potentially triggering further legal and financial complexities related to Spain's energy policy reforms.

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The European Commission maintains that only it has the exclusive jurisdiction to approve state aid within the European Union and expresses the view that the arbitral tribunal essentially substituted its assessment by awarding the compensation.