UK Court Limits Sovereignty Clauses in Renewable Energy Dispute

The UK Supreme Court ruled that Spain could not claim sovereign immunity to block a multimillion-euro arbitration award related to renewable energy incentives. The decision affirms investor rights under the Energy Charter Treaty, as Spain had attempted to contest the registration of the award granted by ICSID.

In a landmark decision, the United Kingdom's top court has ruled that Spain cannot invoke immunity to halt the registration of a multimillion-euro award concerning cuts to renewable energy incentives. This decision narrows the scope for states to claim immunity in investor disputes, underscoring the binding nature of agreements under the Energy Charter Treaty.

Infrastructure Services Luxembourg and Energia Termosolar, investors in Spain's renewable sector, initially took their grievance to arbitration after Spain withdrew energy subsidies. The International Centre for Settlement of Investment Disputes (ICSID) awarded them 101 million euros, a sum which swelled to approximately 120 million euros with interest. Spain's attempts to nullify this registration in London's High Court were previously rejected in 2023, and again on appeal in 2024.

The Supreme Court reaffirmed these rulings on Wednesday, clarifying that Spain consented to UK jurisdiction by signing the ICSID Convention. However, the court also noted that states might still claim immunity concerning the enforcement of arbitration awards against state property. Spain's appeal was adjudicated concurrently with Zimbabwe's failed appeal in a distinct land expropriation case.

(With inputs from agencies.)